Big drop in commercial vehicle sales

Transportation shrinkage squeezes commercial vehicle sales with trucks, cargo vans and covered vans gathering dust in shops across Bangladesh, in an indicator of sluggish economic activity.

Apart from slowdown under impact of global volatility, showroom owners, operators and importers say that added-up cost from toll extortion and other charges during haulage causes decline in the trade as well as fuels commodity prices.

Also, they add, a number of other factors like difficulties in opening letter of credit (LC) by truck importers, higher fuel prices, and the ongoing foreign-exchange crunch, besides the higher cost of vehicles, drive down the sale of such commercial transports.

And inexorable inflation casts a damper on consumer spending, making it more difficult for people to afford to buy new commercial vehicles.

The number of trucks that took registration stood at 3,008 between January and June 2022, and then goes a climb-down. A total of 1,202 trucks got registered during the corresponding period of 2023.

Truck registration declined more than 60 per cent in the six months this year.

A total of 1,280 cargo vans got registered in 2018 while it was 4 in 2019, 2 in 2020, 3 in 2021, 3 in 2022 and nil until this past July.

Some 368 units of trucks sold every month on average in 2022 while the number less than halved to 148 units each month until July this year, BRTA data reveal.

The market size of commercial vehicles more than doubled from Tk 20 billion in 2010 to Tk 44 billion in 2021. That means the average annual growth remained about 15 per cent.

Analysts and sector-insiders attribute this growth to continued improvement in road and infrastructure facilities.

Bangladesh Truck and Covered Van Owners Association organising secretary Khurshed Alam Khan says nearly 50 per cent of trucks are now not operating due to a drop in demand.

"The Ukraine-Russia war, current economic condition and difficulty in opening LC may result in the slower sale of trucks," he indicates.

"Extortion from goods-laden trucks on roads and highways across the country continues unabated despite prohibitive High Court orders and repeated calls to stop it. And this happens to be a cause of the drop in the overall truck sales," Mr Khan says.

He mentions a vicious circle on road haulage, saying that "if the drivers are reluctant to give toll to the extortionists, they are assaulted and the truck's glasses are broken."

The higher transport cost also is dwindling demand for trucks as it costs Tk 22,000 to Tk 23,000 to carry goods from Chattogram to Dhaka, he noted.

"A section of people in uniform and armed goons are still extorting tolls from goods-carrying trucks on different roads and highways across the country," he says, and that vindicates flurries of media talks on such nexus.

The association's organising secretary and talk-show talkers are of the opinion that this extortion adds up to prices of essential commodities and that is why consumer prices are still skyrocketing, beyond any measure in cases of some daily necessaries.

Talking to the FE, Rajesh Kumar Yadav FCA, Chief Financial Officer (CFO), Runner Motors Ltd, the distributor of Eicher-brand trucks, said he had not even sold 60 to 70 units of trucks on average per month since January until July this year, but it was 150-160 units per month last year.

His company sees more than 50-percent drop in sales, Kumar stated.

It holds a 33-percent market share and plans to increase 35 per cent this year, he said about their business-expansion plan.

A class of enthusiastic buyers, who are not corporates, are now not confident enough to buy trucks due to the current economic situation, Yadav points out.

"We are not fully dependent on corporate sales," he says, hoping that the commercial vehicle sales might increase in the months ahead.

The CFO claims many buyers are facing trouble paying their EMI (Equated Monthly Instalment) properly, amid the downturn.

Dump-truck sales also witnessed a drastic decline in the period, he adds.

He blamed higher dollar rates, LC-opening difficulties and higher cost of transport for the low sale of trucks.

Md. Sazzad Hossain Talukder, company secretary at IFAD group, the sole distributor of Indian Ashok Leyland, told the FE that his company witnessed a decline in truck sales during the period due mainly to higher foreign-currency rates and the Ukraine-Russia war.

"It is difficult to predict the future market trend amid this situation," he says at this crossroads in trade.

The company's revenue from vehicle assembling and bodybuilding soared, but the sales of imported vehicles plunged 40 per cent in the nine months until March this year, according to the company's financial statement.

Muhammed Shahidul Islam, chairman, HNS Group, the sole distributor of commercial vehicles of Hyundai Motor Company (HMC) of Korea for marketing their trucks, buses and special vehicles in Bangladesh, said difficulty in opening LC and local-currency devaluation are significantly impacting trade in commercial vehicles, including truck sales and imports.

His company witnessed more than 40-percent drop in truck sales during the period, said Islam, who is also secretary-general of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).

"Truck buyers are now unable to maintain EMI due to the existing slow economic activity which is affecting the commercial vehicles market," he adds.

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