The Future Of Automobile Industry In Bangladesh
The GDP growth of Bangladesh has increased by 4%, the per capita income reached $2097 in June 2021. This exponential growth fuels the demand for personal transport. Once personal transport was considered a luxury now is becoming more of a necessity for Bangladeshi. But does it really mean that the automobile industry has a good future ahead? Before jumping to the conclusion we need to evaluate present and past market scenarios and the future possibilities of this industry. So, let’s examine the future of the automobile industry in Bangladesh.?
Automotive Industry Background?
From the beginning, there was no automobile manufacturing plant in Bangladesh. But we have assembled industry from the beginning. Pragoti Industries Limited (PIL) is one of Bangladesh's oldest and biggest car assemblers. Since its start in 1966, the business has produced approximately 50,000 cars. Along with Pragoti other firms like Rangs Motors, PHP Motors stepped into the automobile assembly industry of Bangladesh.??
Besides, the automobile market has a huge dependency on imported vehicles. Due to the heavy import tax, brand new cars are not the preferred one for Bangladeshis. Second-hand cars are known as reconditioning vehicles that dominate most of the automobile market. According to the BBS In 2020 Bangladesh imported 2,76,094 vehicles.?
Present Market Scenario?
While the country's passenger vehicle sector remains small compared to its Asian counterparts, the number of vehicles per 1,000 people is just 2.5. Today, the market has exploded and has become a billion-dollar business (BDT 84,969 million).??
4 Wheelers Vehicle Market?
Passenger vehicles are most popular in the 4 wheeler market. It grabs a 5.3% automobile market share. Among the passenger vehicles Sedan is commonly known as private cars grabs the 55% market share of the passenger vehicle market. According to the Bangladesh Road Transport Authority, 12,403 units of passenger vehicles were registered in 2020. 4911 SUVs and 2779 units of Multi-Purpose Vehicles (MPV) vehicles were registered in 2020.?
Japanese imported reconditioned cars are most preferred in Bangladesh. In 2020 82% of the passenger vehicles were imported from Japan. Though there were other options like China, Germany, India, Malaysia.??
Bangladesh's commercial vehicle sector is reliant on Asian imports, particularly India, Japan, and China. TATA, Ashok Leyland, and Eicher dominate the Bangladeshi truck market. Chinese manufacturers dominate the LCV & Pickup sector. Some Japanese and European trucks and construction equipment operate in Bangladesh, albeit in small numbers. The inter-city passenger bus market is dominated by Japanese and European manufacturers. The luxury ac bus market is dominated by Scania, Volvo, MAN, Mercedes-Benz, and Hyundai Universe. Hino and ISUZU are also present in this market. In the non-ac bus industry, Hino is the market leader and has the most shares. In the intra-city market, Indian manufacturers have taken the lead. TATA, Ashok Leyland, and Eicher dominate the intra-city market.
2 Wheelers Vehicle Market?
82% of the automobile industry is dominated by 2 wheelers. The 2 wheeler market started to grow quickly in the fiscal year 2016-17 when the government reduced the additional tax on imported two-wheeler components by 25% to promote local production. Within half a year of the decision, motorbike prices fell from Tk 30,000 to Tk 50,000, and distributors offered equal monthly payments and special discounts for certain festivals. Bajaj, TVS are the major players in the 2 Wheeler market but Runner, Mahindra, Yamaha, Suzuki are also contributing a major part in the industry.?
The Future of Automotive?
Due to the high import tax, the automotive market can not experience high growth in brand new cars. But the good news is, the assembly industry is growing gradually and that shows the light of hope in the industry.?
Fair Technology, the sole distributor of the Hyundai cars in Bangladesh intends to spend 125 million to build an assembly facility on the High-Tech Park of the Government. PHP Motors built a 400 core assembly factory in Chattogram. Uttara Motors Ltd is another dealership that has shifted to local vehicle assembly. They are spending $33.63 million to construct a Maruti Suzuki assembly factory in Bangladesh. Another local automotive firm Bangladesh Auto Industries Ltd. (BAIL), is constructing a battery electric vehicle (BEV) factory on Bangabandhu Industrial Park. The firm intended to spend $200 million initially, with the project's overall investment reaching $1 billion within five years. They intended to make two wheelers, three-wheelers, sedans, hatchbacks, and SUVs, as well as pick-up trucks, mini-trucks, and multifunctional vehicles. They intend to sell SUV at 25 Lakh BDT, Sedan at 12 Lakh, Hatchback at 8 Lakh BDT or less.?
Along with the local investment Bangladesh got a huge foreign investment in automobiles. In August 2018, Chinese automaker Foton Motor announced plans to build commercial cars in Bangladesh alongside ACI Motors. In May 2019, Mitsubishi Motors announced a $100 million investment in Bangladesh to manufacture its branded cars. The firm used the funds to build a vehicle assembly factory in Chittagong's Mirsarai Economic Zone.
Challenges for Future Growth
In Bangladesh, imported vehicles have unusually high taxes and customs that start at 128% and reach as high as 700% depending on the engine capacity. Besides supplementary duty, one has to pay 25% customs duty, 3% regulatory duty, 5% trade vat, and 15% vat which increases the price of the imported car.?
COVID-19 also has a huge impact on the growth of the vehicle market. The overall sales dropped during the pandemic. According to the experts, marketing is growing on average 15-20% during the pandemic.?
Final Thoughts
Bangladesh has a huge potential in the automobile market. Huge investments are coming for the assembly industry. Already many brands and local industries started to assemble motorcycles and 4 wheelers in Bangladesh. However, the high tariff on imported cars restricts the overall growth of the imported vehicle. If the government reduces the traffic on the automobile the market would experience exponential growth in the future.?
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