{"id":16497,"date":"2021-10-31T13:53:29","date_gmt":"2021-10-31T07:53:29","guid":{"rendered":"https:\/\/bbf.digital\/new\/?p=16497"},"modified":"2025-07-20T11:51:26","modified_gmt":"2025-07-20T05:51:26","slug":"breakthrough-automobile-industry","status":"publish","type":"post","link":"https:\/\/bbf.digital\/new\/breakthrough-automobile-industry","title":{"rendered":"Breakthrough Automobile Industry"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The automobile industry of Bangladesh might grab a breakthrough in the next ten years as tax exemption has been proposed for companies that are engaged in the production of automated vehicles in Bangladesh as part of supporting &#8220;Made in Bangladesh&#8221; brands. This might become a turnaround for this industry and a route to self-sufficiency. The growing industry size, tax cut and investment are showing a ray of hope to this emerging industry.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Industry Size<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The annual demand for manufacturers\u2019 economies of scale is 1 lakh units in this market. The <\/span><span style=\"font-weight: 400;\">market is selling 12-29 thousand units per year. According to Bangladesh Road Transport Authority (BRTA), total number of registered vehicles in the country is 4,471,625, among them only 370,519 are &#8216;Private Passenger Car&#8217; followed by 105,896 &#8216;Microbus&#8217; and 66,219 &#8216;Jeeps&#8217;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, from 2003 the number of registered motorized vehicles increased four times in 15 years only. Nowadays, people are getting interested in buying cars which might be a great opportunity for local industries.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An online survey done by Lightcastle reveals that 50% of buyers consider \u2018unique features and specification\u2019 and 44% of buyers consider \u2018brand value\u2019 and around 34% of buyers consider \u2018availability of parts and service\u2019 of a car before purchasing. But the latest features are not available in reconditioned cars. Automobile Industry Development Policy, 2020 shows that the market size of passenger cars initially is less than 100k when cars are reconditioned. After local production promotion, it overtakes the 100k mark. The interesting fact is if each auto-makers establishes a local production network and mass-production\/ export promotion policy the market size climbs up between 300k and 500k, estimating that the local contribution will go up to 50% from 5% for 3 wheeler in ten years.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Also, the other vehicles will contribute a portion between 20% and 30%. On the other hand, the number of imported cars will be reduced by imposing used year restrictions. In the first couple of years, no more than 4 years of used cars will be imported. In the last year, there will be no imported used cars. So the market for brand new cars will be big and the local market will start to take the charge.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Manufacturing Facilities<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Government is ready to promote this industry and the plan is to make this industry valuable to the GDP of this country. <\/span><span style=\"font-weight: 400;\">The government will periodically review the structure of tax and non-tax incentives to stimulate demand, boost the growth of the auto industry and prevent Bangladesh from becoming an international waste dump.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">As per the draft policy, the incidence of import tariff will be fixed in a manner so as to facilitate the development of manufacturing capabilities as opposed to mere assembly <\/span><span style=\"font-weight: 400;\">without providing inadequate protection; Guarantee a balanced transition towards trade openness; Promote greater competition in the market and expand the purchasing options for the Bangladeshi customer. The government will periodically review the auto rate structure to stimulate demand and help the industry grow. <\/span><span style=\"font-weight: 400;\">In addition to that, used vehicles imported into the country would have to meet environmental requirements as per BRTA laid down specific standards and other criteria for such imports. In order to achieve critical volume levels in this industry for both domestic and external markets, and enjoy economies of scale, the Government will enhance negotiation towards harmonization of rules of origin and elimination of Non-tariff barriers within the region trading blocs, as well as bilateral and multilateral trade agreements to facilitate growth and development of the automotive industry.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Currently, the excise duty on commercial vehicles sold by a manufacturer as a chassis or full body is very low. However, there is no charge for bodywork built by an independent bodybuilder on a chassis purchased from a manufacturer. This exemption makes it difficult for the chassis manufacturer to produce complete trucks and buses and is at the expense of safety regulations.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The duty imposed on the construction of bodies by an independent bodybuilder, small or organized sector, shall be equal to that of bodies built by a chassis manufacturer. The Government will encourage the fabrication of bus bodies on bus chassis designed for better passenger comfort instead of truck chassis as is the current practice.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Key Trends<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Even a few years back, this automobile market of Bangladesh was dominated by Japanese reconditioned cars. However, recently the demand for Japanese reconditioned cars has been slowly declining. In the span of four years from 2016 to 2020, the demand decreased 10% for reconditioned cars in our country\u2019s market. The main reason for the declining rate is Tax. The \u2018NBR\u2019 imposed the tax considering the base value on reconditioned vehicles rather than their depreciated 2nd hand value. This made the reconditioned cars more expensive than the actual price.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, brand new cars are taxed in Bangladesh based on the importer\u2019s actual cost. The price difference between reconditioned cars and brand new cars becomes the least. As a result, people are becoming more interested in purchasing brand new cars.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An online survey of Lightcastle shows that 44% of buyers check \u2018brand value\u2019, \u2018availability of parts and service\u2019 is considered by 34% of buyers where \u2018unique features and specification\u2019 is looked at by 50% of them before purchasing a car. Latest features are not included in reconditioned cars. Revenue from the reconditioned car segment has fallen off one-third of what it was four years back.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Between 2016 and 2020 the market share of brand new cars doubled. The share rises to 16%. In 2025, it is assumed that the market will go up between 20%-60%.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Sports Utility Vehicle (SUV) &amp; Hybrid Vehicles Gaining Popularity<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">At one time, SUVs and JEEPs were supposed to be used by government officials and important corporate personnel. As SUVs provide better driving comfort in Bangladeshi road conditions as well as high ground clearances; in recent years, following the global trend, SUVs are becoming popular among family buyers too. The sportier look of SUVs attracts the younger generation as well. Lightcastle survey shows that 28.1% of prospective buyers are willing to buy an SUV in the future. In 2017, only 16% of the market shares were dominated by SUVs which was increased to 24% by 2020.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Moreover, hybrid cars are getting attention significantly from buyers. Toyota Axio, Honda Grace, Nissan X-trail are some of the popular hybrid vehicle brands in Bangladesh. Because of providing extra BHP for the car and the lower tax rate these cars are getting popular in this market. For example, Toyota has introduced a hybrid version of their most popular SUV \u2018The Land Cruiser 2021\u2019 model. In 2018, the hybrid four-wheeler market achieved a 900% sales increase. According to a leading importer and retailer of the Bangladesh automobile industry, a basic 1500 cc car can run 7-10 KM\/liter, while a hybrid car with the same cc can run almost 15-25 KM\/liter.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>10-year tax break<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Considering the high demand and popularity, local facilities are being set up by many companies. They are collaborating with global giants for a \u2018Made In Bangladesh\u2019 product which specifically means local production. <\/span><span style=\"font-weight: 400;\">Some leading local groups, including Uttara Motors, Ifad, Runner, GPH, in collaboration with their foreign technology partners, have proposed a suitable package for automotive investors totaling almost 3 billion.<\/span><span style=\"font-weight: 400;\"> The sole distributor of Hyundai cars, Fair Technology Limited, signed a contract with Bangladesh Hi-Tech Park Authority (BHTPA) and plans to invest $125 million in the next three to five years for providing 5000 vehicles every year. PHP Motors has already started to manufacture cars made by Malaysia&#8217;s Proton. The company began assembling the 2021 Proton Saga, according to PHP Automobile chairman Sufi Mohammed Mizanur Rahman.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another company, Pragati Industries, is working with the famous Japanese automaker Mitsubishi Corporation to build Bangladesh&#8217;s own brand of cars. Around 80 percent of the motorcycles circulating in the country were manufactured or assembled locally, according to a report in the Daily Star. Bangladesh Honda (Private) Ltd. recently celebrated the milestone of its cumulative production of 200,000 units. However, Runner,\u00a0 the local motorcycle company, reported production of 1,000 motorcycles per day in 2019. The company also launched exporting two-wheelers to Nepal and Bhutan in 2017, shipping more than 700 units of motorcycles in 2019.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Policy Support<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The newly proposed policy promotes local manufacture of automotive products that meet the standards and specifications of Original Equipment Manufacturers (OEMs). This will provide opportunities to the companies which are working for Joint ventures with global value chain players to produce affordable local products.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">To support the growth of the automotive industry in Bangladesh for both domestic and export consumption, thereby becoming a significant contributor to the manufacturing sector GDP by 2030, with an initial impact realized by 2025. The policy provides fiscal incentives for the construction of assembly plants as well as tax trimming for importing semi-knocked down (SKD) and completely knocked down (CKD) parts to facilitate the local assembly. <\/span><span style=\"font-weight: 400;\">The policy objective is to increase local production for import substitution which will lead to the increased export of automotive products in the sub-continent and middle east.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Achievements And Future<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In the market, Japan made cars have a high demand. The consumer survey portrays the brand reputation over other factors like durability, feature, <\/span><span style=\"font-weight: 400;\">price etc. However, brand reputation is no longer the top factor in consumers\u2019 minds. Buyers today place more emphasis on the durability and quality of vehicles and the specifications they offer, over brand reputation. It is shown that 63% look for durability and quality where 50% go for specification. Brand recognition has a 44% effect only.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">As the younger generation going for more and more non-Japan-made cars &#8211; such as Chinese brands such as Great Wall Motors and Korean brands like Hyundai. It will lead to a more competitive market in the future. In the LightCastle survey , it is seen that the local production of passenger vehicles can lead to an industry-wide overall price reduction within the range of 15% &#8211; 40% by 2025. It will be a great boost for the market. The population of the middle class is expected to increase by 34 million by 2025. As the price will go down as much as 40%, many more consumers will purchase family cars and will go for brand new cars rather than entering the secondary market. The market sales are expected to touch between 32000 to 46000 annually at that time.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Road Ahead<\/b><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Though there are many opportunities shown, the coming days won\u2019t be so smooth. The scenario might change as some development works are ongoing to finish in the near future. For example, the inauguration of the mass rapid transit projects and the convergence of the myriad bus routes into a franchise system in Dhaka city might be a very good factor for passenger cars. If the transportation system situation gets better, the need for personal vehicles might decline than the anticipated demand.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Another thing that can lessen the demand for personal cars is ridesharing. It is getting popular though there are some mixed opinions about the service. The youth who are going after quality and specification right now might go for an easy transportation system, not personal cars or vehicles. As the government is trying to promote this industry, it is very obvious that some other rules in other sectors might be introduced to take care of this industry\u2019s growth. Going forward, the government may also choose to implement traffic restrictions such as the odd-even scheme.\u00a0 <\/span><span style=\"font-weight: 400;\">It will allow cars on the road based on their number plates. Odd and even number cars will be allowed on alternate days which have already been seen in New Delhi.\u00a0\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">To end with, this might be an excellent breakthrough for the automobile industry of Bangladesh considering the increasing demand and investment, tax break policy, and manufacturing facilities. This tax break policy could become a landmark policy and become another source of spreading \u2018Made In Bangladesh\u2019 in the world.<\/span><\/p>\n<p><em><strong>By Raiyan Kabir Rajin<\/strong><\/em><\/p>\n\n    <div class=\"xs_social_share_widget xs_share_url after_content \t\tmain_content  wslu-style-1 wslu-share-box-shaped wslu-fill-colored wslu-none wslu-share-horizontal wslu-theme-font-no wslu-main_content\">\n\n\t\t\n        <ul>\n\t\t\t        <\/ul>\n    <\/div> \n","protected":false},"excerpt":{"rendered":"<p>The automobile industry of Bangladesh might grab a breakthrough in the next ten years as tax exemption has been proposed for companies that are engaged in the production of automated vehicles in Bangladesh as part of supporting &#8220;Made in Bangladesh&#8221; brands. This might become a turnaround for this industry and a route to self-sufficiency. The [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":16498,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[613],"tags":[1262],"class_list":["post-16497","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-premium-content","tag-premium"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v25.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Breakthrough Automobile Industry | BBF Digital<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/bbf.digital\/new\/breakthrough-automobile-industry\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Breakthrough Automobile Industry\" \/>\n<meta property=\"og:description\" content=\"The automobile industry of Bangladesh might grab a breakthrough in the next ten years as tax exemption has been proposed for companies that are engaged in the production of automated vehicles in Bangladesh as part of supporting &#8220;Made in Bangladesh&#8221; brands. 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