An ebb tide of the Bhutanese automobile industry

Not a single order has been placed by any of the automobile companies in the country with their foreign agents since March this year. While automobile business, apart from second hand car dealers has suffered a rapid slowdown, the government hasn’t shown any signs to lift the ban on car imports which was effective since March 2012.

Car companies now fear that very soon they might have to entirely close down their businesses.

Almost all the automobile dealers currently manage with the income from sale of vehicle spare parts and services which is also turning scanty.

A general manager with State Trading Corporation of Bhutan Limited (STCBL) Karma Gyeltshen called the situation rather ‘obnoxious’ and said that there is now no definite future of automobile industry. “The problem is hanging like a pendulum with no one addressing the issue,” he said.

Slump in business

All the car companies that The Bhutanese talked to are barely able to meet even their overhead costs from the business proceeds.

Karma Gyeltshen said “even the few orders STCBL got from the government and NGOs have stopped now”.  Managing Director of Samden Vehicles, Kouenleg Gyeltshen said his company is faced with a serious issue of sustenance. “We are presently sustaining on the services such as car repair but that doesn’t cover our overhead costs for more than 70 employees,” he said.

He said the company has a lot of repayment problem with liabilities such as bank loans.

A senior official with Zimdra Automobiles said the company will be forced to close if the trend continues. “Every month we have been hopeful and was sustaining on proceeds from spare parts sale and services but in vain,” she said.

She said despite the green tax, companies can at least survive if certain imports are allowed. “While a second hand car which has been repaired over and over again causes more pollution, there are no taxes applicable on it”. “There is no equity since first time buyers are in genuine need of a car while others have more than one car,” she added.

Manager of Bhutan Hyundai Motors Pema Loday said the situation has just become worst since the beginning of this month. However “we have positive thoughts about the issue that imports will be allowed,” he said.

Credit crisis makes it impossible to sell stock

While hundreds of vehicles are gathering dust at different car companies, prospective buyers are also at a loss with orders placed but unable to make payments with the freeze on vehicle loans.

Kouenleg Gyeltshen is among the many who said they are finding it difficult to sell stocks. He said though the issue actually originated from the Indian Rupee (INR) shortfall, the situation is different as of now. “Now it’s nothing to do with the INR but because of lack of loans from banks though we have stocks for sale”. Like any other car dealers, STCBL has more than 150 vehicles in stock and business worth more than Nu 130mn stuck as of today. “There was no prior warning from the government and their abrupt decision came after the company had made all the purchases,” said STCBL GM Karma Gyeltshen.

He clarified that “there are more than 20 customers with STCBL who are genuinely in need of a car and can afford it without any financial assistance from banks but their choice of car is not in stock and import is banned”.

 

Possibility of retrenchment

While there are no car imports and no sale, employers are still bound to make payments to their staffs apart from other overhead expenses.

Owing to the job security fret a substantial number of employees from all the companies have voluntarily resigned even before their employers are forced to downsize human resource.

A Zimdra official in Phuentsholing said the authorities could consider a quota system on the number of cars a company can import over a certain period of time. “So that at least employees will get their salaries even if there is no profit”, she added.

She said majority of the employees are from humble and simple families and “luckily no one has been laid off as yet”.

Among others, 25 employees have resigned from Samden Vehicles and a few from Bhutan Hyundai Motors. Kouenleg Gyeltshen cited lack of job security as the primary reason.

Although STCBL currently has more than 197 employees, Karma Gyeltshen said the company may have to resort to “retrenchment very soon depending on the situation”.

“STCBL’s Karma Gyeltshen said buyers are ready to pay the green tax imposed by the government. “But we cannot process for import license because the department of trade and industry is of the view that the suspension of vehicle imports was issued as per the cabinet notification and therefore without any letter from the government to lift the ban, they cannot help,” he said.

He said he personally met the officials more than thrice but everyone just passed the “buck” from one to another and nothing came out of it.

Trade officials were unavailable for comments.

Check Also

Bhutan Airlines and Druk Air struggle with Nu 1.8 bn in losses

The Coronavirus has left many business entities in shambles all across the world and the …

5 comments

  1. What a lousy report. There is ban on import of vehicle and at the same time dealers are having hard time to sell the stock – very conflicting. The core issue here is customers are deprived from credits……….

  2. THE GOVERNMENT SHOULD HAVE BEEN SMART LONGTIME BACK, BUT WHATEVER IS HAPPENING IT IS HAPPENING FOR THE NATION, RATHER TO SAY SORRY AFTER. MOST PEOPLE WANT TO TAKE MORE THAN WHAT THEY CAN REALLY CHEW. THERE IS NO SMOKE WITHOUT FIRE ANYWAYS.

  3. Mr Digest. Thank you for your comments. I normally don’t respond to comments on my stories ‘posted anonymously ‘ by bloggers. I stand by all my stories even if lousy readers put it as a ‘lousy report’. Use your analytic skills if you have any or the easy way is to read the whole story and not just a part of it. Its not just about the freeze on credit, there is an existing ban on car imports today. There are many factors that need to come together for a vibrant economy which is too big for you to understand. In the same story, please read the last paragraph of the article under the sub-heading ‘credit crisis makes it impossible to sell stock’ . 
    you make me wonder if people like you and your kind think about the fact that members of “the media,” unlike anonymous bloggers, sign their names to their work, making themselves accountable to the courts of law and public opinion. TASHI DELEK

    • This article is fine, however, you must also concede that your story under the catchy headline, MOE fires PDP principal and lets the DPT one of the hook was journalism which had a lot to be desired. If you stand by that story, then you must be one journalist with absolutely no moral ethics.

      Cheers.

  4. The whole of Bhutanese know that the country is in crisis. It is responsibility of all citizens to bear with the situation and work towards readdressing it. Even the developed country like Spain is under the crisis now.

    Therefore, this story has some vested interest.

Leave a Reply

Your email address will not be published. Required fields are marked *