Vehicle dealers explore alternative strategies amid moratorium
In the face of a prolonged moratorium and increased taxes on vehicles, vehicle dealers in the country have experienced a significant decline in sales, impacting its revenue and profit. As a result, the companies are actively seeking alternative avenues to sustain its operations and mitigate the effects of the economic downturn.
The chief executive officer (CEO) of State Trading Corporation of Bhutan Limited (STCBL), Tshering Wangchuk said that the company has been heavily reliant on vehicle sales for its sustenance and had anticipated the moratoriums impact on the country’s foreign exchange reserves.
To reduce expenses, the STCBL made strategic cuts, such as discontinuing non-essential expenditures like office meeting lunches, landline subscriptions, and newspaper subscriptions. “Every ngultrum was deemed crucial for the company’s survival,” the CEO said.
STCBL also expanded the fuel retail network. Initially there was only a single outlet in Thimphu, but STCBL now have three outlets. There are also plans to establish an additional six by the end of the year. The company also aims to reach a total of nine outlets within 2023, “with fuel distribution becoming a priority project.”
The CEO also said that they had resumed its boulder export business to Bangladesh, and is planning to open a retail outlet in Dhaka to sell Bhutan-made products. “We are also working closely with the CSI Market and we hope that these ventures will contribute to the country’s hard currency reserves, despite the practical challenges associated with the business,” the CEO added.
Despite the difficult financial crisis, the CEO said that they did not layoff any employee during the moratorium. But the company has experienced a high attrition rate as some employees chose to resign and seek opportunities abroad.
Similarly, Pema Loday, the General Manager (GM) of Hyundai, expressed concerns about the adverse effects of the ongoing moratorium on the company’s operations and emphasized on the financial strain caused by the inability to make sales while continuing to bear expenses.
While minimal restructuring has taken place within Hyundai, the company has collaborated with Isuzu, attaching some of its staff members to assist with various activities at Isuzu. Moreover, the GM added that the company’s focus has shifted towards services and spare parts, as a means to sustain its operations during this challenging period.
However, one of the major challenges highlighted by the GM was the retention of staff members. He said that due to the uncertainty surrounding the moratorium, Hyundai has refrained from laying off any employee.
The GM shared that even if the moratorium is lifted, the overall market situation in the country remains unfavorable. For instance, he shared that the demand for Isuzu pickups has not surged, and there has been a considerable decline in the demand for cars, along with reduced hiring in the tourism sector.
Zimdra Automobile, another enterprise also shared that their enterprise also faced a significant impact, and they had to even lay off some employees too.
Meanwhile, Chencho Tshering, the Chief Planning Officer (CPO), Ministry of Finance (MoF), said that discussions on this matter are still underway. However, he indicated that the chances of the moratorium being lifted is slim.
The Ministry of Finance had issued a notification extending the existing moratorium on the import of vehicles six months from February 18 until August 18, next month. The moratorium was issued as Bhutan saw a sharp and significant decline in foreign reserves last year. The reserves decreased from 839.6 million USD (sufficient to meet15.08 months of essential import) in June 2022 to 772.3 million USD (sufficient to meet 13.87 months of essential import) in July 2022, a decline of over 67.3 million USD in just a month.
As per the MoF’s notification, the moratorium covers all vehicles, including two-wheelers, except utility vehicles, heavy earthmoving machines, and agriculture machinery. The import of utility vehicles costing less than Nu 15,00,000.00, equivalent to USD 20,000 (whichever is less), is permitted. Further, vehicles for the use and promotion of tourism are exempt from the moratorium. Additionally, taxis, both fossil and electric which are due for replacement are also exempted from the moratorium.
Nidup Lhamo from Thimphu