There was a time when Bangladesh relied heavily on agricultural products for economic growth. “The Golden Fibre” was the only driving factor for the economy. Everything else was scarce to make a difference. Even Jute barely had any significant impact at one point due to technological advancement and other alternatives. But during the late 2010s, Bangladesh started to make strides toward greater economic possibilities. As a result, the country now has more than just one source of profit for upward growth. However, as expansive as the nation’s economy may have been, many potential sectors still need to be explored.
The automotive industry is one such opportunity. Observing current trends in technology and innovation, automobiles have become a crucial part of modern economic growth. The country’s middle and higher middle classes have improved their socioeconomic development and purchasing power over the past ten years. This has led to a gradual increase in the car industry’s growth. Data from the BRTA shows that the number of passenger cars rose at a CAGR of 5.43%. However, Bangladesh still has a shallow passenger automobile penetration rate compared to other Asian nations. There are just 2.5 automobile owners per 1000 people. According to recent studies, 30 out of every 1000 Indians owned an automobile.
In the past 20 years, there has been a noticeable growth in the usage of motorised vehicles. In 2003, Bangladesh had just 303,215 motorised vehicle registrations. But according to BRTA data, there are 4,729,393 registered automobiles in Bangladesh as of April 2023. 544,616 of these are passenger automobiles. With sedans accounting for about 68% of the market for passenger cars, the automobile industry is once again dominated by them. Sports utility vehicles (SUVs) and microbuses cover 12.40% of the remaining traffic. More individuals are purchasing automobiles due to rising purchasing power than ever before.
Although automobiles are not manufactured in Bangladesh, several public and private businesses have constructed cars. ‘Pragati Industries Limited’ launched the first vehicle manufacturing line in 1966. They were conducting business in conjunction with the government. The company was nationalised by the Bangladesh government after gaining independence. In essence, this facility assembles SUVs under the Mitsubishi brand.
With assistance from the Japanese Mitsubishi business, the Bangladeshi government also intends to produce locally branded automobiles here at ‘MUJIB BORSHO’. Aftab Automobiles, Fair Technology Limited, Bangladesh Auto Industries Limited, Bangladesh Machine Tools Factory, Bangla Cars, Niloy-Hero Motors, PHP Automobiles, Pragoti Industries Limited, and Runner Automobiles are a few other local private auto assembling businesses active in Bangladesh. However, the market has yet to show much interest in locally-made automobiles. In 2020, 82% of newly registered automobiles were imported, used, or from the grey market, 16% were imported brand new, and only 2% were locally made. Let’s look at some recent trends in the Bangladesh car industry.
Industry experts claim Bangladesh’s booming vehicle industry has grown 8% yearly since 2012. The local vehicle industry has been regarded as a potentially crucial industrial sector for the past 20 years, according to the Vehicle Industry Development Policy 2021. As the government released the nation’s first-ever programme to grow the industry, Bangladesh will reduce its over-reliance on imported automobiles and become a regional manufacturing center by 2030.
Reconditioned vehicles have historically accounted for a sizable portion of Bangladesh’s automotive market. In 2020, 82% of all passenger vehicle sales were imported rebuilt automobiles. Customers place the highest value on Japanese imports above all other types of vehicles. However, according to industry sources, customers’ perspective has clearly changed. Young buyers and influencers have spurred an increase in interest in brand-new automobiles in recent years. Genuine components for brand-new and high-end vehicles are now available thanks to authorised importers and dealers. New automobiles made up 7% of the market in 2016. The market share increased by twofold to 16% of the whole industry in 2023. New automobiles from a variety of Chinese, German, Indian, Malaysian, South Korean, Thai, UK, and US manufacturers are being imported. By 2025, the market share of new cars is anticipated to rise to 20% – 60%.
Due to localised manufacture in recent years, the two-wheeler sector was able to sell 500,000 units annually thanks to the affordability of motorbikes. According to industry analysts, reaching the yearly sales milestone of a million units will allow the local sector to invest more in component manufacture, the foundation of a robust industry. Additionally, Bangladesh Reconditioned Vehicle Importers Association’s (Barvida) President Abdul Haque cited a study by Japan International Cooperation Agency (JICA) that for a viable car industry, the market must increase to one lakh units annually; otherwise, the lack of scale would make the task of the investor companies difficult.
According to the head of Bangladesh’s 900 importers and dealers of used automobiles, the country can increase its auto industry, provided the government rationalises taxes and levies to lower car prices. In Bangladesh, imported automobiles are subject to very high tariffs and taxes, which start at 128% and may reach 700%, depending on the engine size. The market for hybrid automobiles in Bangladesh is expanding significantly. Some well-known hybrid car manufacturers in Bangladesh are Toyota Axio, Honda Grace, and Nissan X-trail. Hybrid vehicles are becoming increasingly popular among purchasers since they are taxed less than gasoline-powered cars. Hybrid vehicles also include motors that contribute to the vehicle’s BHP capacity. Therefore, models of similar cc cars offer more power than their petrol counterparts.
Due to the high tariff structure on imported cars, foreign investment in the local auto sector could be more active. The Ministry of Industries released the “Automotive Industry Development Policy 2020,” which allows domestic and foreign investors to build up local assembly factories. The policy offers tax breaks for the construction of assembly factories and tax exemptions for the importation of partially knocked-down (SKD) and fully knocked-down (CKD) parts.
By 2030, the Bangladeshi government wants at least 15% of all registered vehicles to be powered by “environmentally friendly electricity.” As a result, local businesses are staying caught up in the production of electric vehicles (EVs). In Bangabandhu Industrial Park, Bangladesh Auto Industries Ltd. (BAIL) is constructing a Battery Electric Vehicle (BEV) plant.
Reviewing local and global experience with the manufacture of automobiles reveals both tales of successful and futile endeavours. Most East and Southeast Asian nations began their vehicle industries in the 1950s and 1960s. International automakers made investments in them directly or via their joint venture partners. The strategies used by various nations varied substantially, which resulted in diverse outcomes. The enormous size of their domestic markets has been a critical factor in developing major economies like China and India. Thailand certainly had a good outcome in manufacturing and exporting vehicles for a comparatively mid-sized economy.
Despite being a smaller country, Bangladesh has a large population. Strategising how to create the market and making different sorts of vehicles more accessible to the greater populace is crucial. It will not only attract significant investors but also will create a greater scope of international business opportunities.
Author- Shiddhartho Zaman
