Inflation makes Ifad, Runner taste losses in FY23

Automotive companies Ifad Autos Limited and Runner Automobiles PLC reported losses in fiscal year 2022-23, the first time since their listing on the stock exchange.

The companies attributed the losses to declining demand for commercial vehicles and motorcycles due to high inflation.

In FY23, Ifad Autos incurred a loss of Tk15 crore, while Runner Automobiles' loss was Tk96 crore.

Owing to the loss, Runner could not recommend any dividend, but Ifad Autos declared a 10% cash dividend to its shareholders for the last fiscal year.

Ifad Autos is the authorised dealer of Ashok Leyland's vehicle to Bangladesh and it has also assembling, body-building and cabin manufacturing facilities.

Runner Automobiles produces motorcycles under its own brand name, imports KTM branded motorcycles and is an authorised dealer of Eicher branded commercial vehicles. It also assembles Bajaj three-wheelers.

According to the Bangladesh Road Transport Authority (BRTA), registration of new vehicles dropped over 53% to 2.72 lakh in FY23 compared to the previous fiscal year.

The BRTA data further shows sales of buses declined by 26%, mini buses by 39%, trucks by 59%, pickups by 49% and motorcycles by 54% year-on-year.

Ifad Autos in its price sensitive statement said sales decreased by 4.76% is due to the demand shrink of commercial vehicles.

It further said that the major reason for decreasing profit is the exchange loss for foreign currency fluctuation and commodity inflation.

Shanat Datta, chief financial officer (CFO) of Runner Automobiles, told The Business Standard earlier, "Due to the ongoing economic crisis, many people are delaying the purchase of new cars. Consequently, two-wheeler sales have dropped by about 50%, three-wheelers by 40%, and commercial vehicles sales by 35% in FY23 compared to the previous year."

"Inflation has significantly impacted two-wheeler sales, as the target customers in this segment are middle- or lower-middle-class individuals struggling to meet their daily needs amidst rising costs, leading to postponement of their purchase decisions."

He stated that overall, the automobile sector witnessed a 35% decline.

Shanat Datta said, "We have been receiving good demand for three-wheelers from the customers, but we cannot supply as demand because of foreign currency volatility owing to the fact that the opening of the letter of credit for imports was not convenient enough."

Prior to the Covid-19 pandemic, Bangladesh automobile market had been growing at an annual average rate of 15-20% while the auto parts market was growing at 12%. Both growth rates are way above the respective global averages, according to the industry insiders.

To meet the high demand for vehicles driven by noticeable national infrastructure investments in roads and highways, bridges and tunnels, and regional connectivity initiatives, companies such as Fair Group, Ifad, Runner, Uttara Motors, and ACI Motors have invested in the automobile industry.

According to the BRTA, there are more than 58 lakh registered motorised vehicles in Bangladesh, while a large number such vehicles, especially two and three-wheelers, are running without registration.

Of the total registered vehicles, nearly 80% are two-wheelers, followed by passenger cars (5%). Buses, trucks, pickups, auto rickshaws, vans, and microbuses make up the remainder.