Growing economy fuels demand for older cars

Imports of reconditioned cars rose 11.5 per cent in the just-concluded fiscal year (2015-16) aided by strong economic growth and rising standard of living, importers said.
In FY 2015-16, import of such cars was around 19, 000 cars compared to 17,055 cars in FY 2014-15.
The demand for older cars has been growing since FY 2013-14, after a declining trend from FY 2009-10 to FY 2012-13.  
Between FY 2009-10 and FY 2014-15, imports of such cars were 32,225, 19,823, 9,588, 7,353, 14,427 and 17,055 respectively.
President of BARVIDA M.A Hamid Sharif said Factors like economic growth, political stability, industrialisation, infrastructure development and standard of living have been playing a significant role behind such an upsurge.
Mr. Sharif, however, said the demand would have been much higher if the government had granted some tax benefits which brand new cars importers enjoy.
"Though the sector is growing but our share in the market has been declining because brand new cars get some tax concession benefits from the government," he said.
He added three years ago, total market share of reconditioned cars was approximately 95 per cent of total cars, which has declined to 85 per cent only because of Indian cars getting tax benefits.
Laying importance on the quality of the brand new cars, Mr. Sharif said the government should adopt 'rigid' policy regarding import of new cars as some non-branded, low quality cars are capturing the market taking the advantage of tax benefits, which is not good for the country's future.
Shahidul Hoque, Assistant Secretary of BARVIDA, said in case of reconditioned cars, tax rate is 131 per cent to 841 per cent, importers of new cars require paying only 61 per cent.
"That's why, some Indian brands are taking this advantage," he said.
He noted that despite discriminatory tax policy, the growth of the sector shows its potential.
If the government can ensure some slab-wise tax benefits, the sector may grow faster than now.
There are five slabs in reconditioned cars and imposition of tax varies according to the slabs.
Up to 1500 cc total tax incidence (TTI) is 131.31 per cent, 1501 cc to 2000 cc TTI is 217.17 per cent, 2001 cc to 2750 cc TTI is 373.26 per cent, 2751 cc to 4000 cc  TTI is 607.39 per cent and more than 400 cc TTI is 841.52 per cent.
"We believe if the government grants certain tax benefits to the sector it will register more growth. If 131.33 per cent TTI can be offered for up to 2000 cc instead of up to 1500 cc, the growth will significantly increase", he added.
The sector is significantly contributing to the government revenue as in FY 2015-16, the sector provided Tk 20.62 billion (2062.25 crore) to the government exchequer, becoming the second-largest tax provider of the country.
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