Bangladesh has huge investment opportunity in motorcycle industry where besides local entrepreneurs foreign investors can engage large funds in either 100 percent owned or joint venture projects.
The local automobiles industry has prospect for annual business turnover worth Tk 5,000 crore. Of this, the size for vendor market would be up to Tk 3,000 crore annually.
Industry insiders made the view while talking to the Bangladesh Post.
Riding on the government’s policy support to expand local motorcycle industry, the country is going to become a fully automotive manufacturing nation soon, they added.
In the policy, a target has been set to reach the capacity of producing 10 lakh units of two-wheelers annually by 2027.
The industry would become an import-substitute sector with the formulation of the ‘Motorcycle Industry Development Policy-2018’ that got the cabinet nod on Monday, industry insiders and experts opined.
Welcoming the just-approved policy, Hafizur Rahman Khan, president of the Bangladesh Automobiles Assemblers and Manufacturers Association (BAAMA) said, this policy has paved the way for the motorcycle industry to gain momentum.
This would encourage huge investment, both local and foreign, and ultimately ensure large employment and income generation in the country, he added.
“The government’s target of enhancing the sector’s contribution to 2.5 percent of GDP is achievable, event this can go higher as the new policy has given a clear message to the investors. More local and foreign investors would now feel confident to make fresh investment in manufacturing of two-wheelers,” said Hafizur Rahman Khan.
Hafizrur Rahman Khan, the legendary entrepreneur in the country’s automobiles industry who is leading the local sector for a decade said development of vendors is a must for flourishing the industry.
“Development of vendors is much essential for growth of the motorcycle industry and without this the sector would not be able to gain momentum,” he said.
“If vendors are developed in adequate numbers here to manufacture spare parts and accessories, the production cost of motorcycles would come down which would make positive impact on enhancement of sales,” he said.
“Besides, the locally manufactured spare parts and accessories could be exported to neighbouring and other countries thus bringing huge foreign currencies in the country,” Hafizur Rahman Khan added.
Not only new ventures, the existing vendors in Japan, Thailand, Malaysia and even India would prefer relocating their plants in Bangladesh taking the advantage of the new ‘Motorcycle Development Policy, as the government has offered a number of preferential benefits for the local manufacture of two-wheelers, he mentioned.
“Besides duty facilities for manufacture, the government has offered 10 percent cash incentives for export of motorbikes,” he further said.
“Since a long, we (manufacturers) had been demanding the policy with a consistent environment, particularly centring taxes and duty rates, instead of fluctuations every year,” he said adding that investors usually get hesitated to make investment for frequent policy shift.
“Financing now is not a problem in Bangladesh as banks are much pro-active to provide funds,” he said adding, “The Bangladesh Bank has announced 10 percent cash incentives for export of motorcycles and this would help expand our export basket.”
“We express gratitude to the government for such support for the industry and this has opened a new avenue for the country’s manufacturing sector,” said Hafizur Rahman Khan.
Runner Automobiles Limited, the country’s lone automobile manufacturing company, is already making the two-wheelers and exporting to neighbouring Nepal.
The company has recently got government approval for manufacturing high-end two-wheelers of 165cc to 500cc capacity by using components manufactured by its own and import of some necessary parts. “We are presently exporting bikes in Nepal market and will start shipment of two-wheelers in Bhutan next month,” said BAAMA chief.
Replying to a query, he said, assemblers are in the process of manufacturing bikes. Development of vendors for making spare parts is an important issue and now more foreign investors would come here with new technology and they would make joint venture with local ones. “The importers should gradually be discouraged for proper implementation of the policy,” he suggested.
Under the policy, the government would give tax benefit to build up motorcycle industry. Welcoming this move, he said, the government is taking lots of positive steps for the industry and this would benefit the people as they would be able to buy two-wheelers at lower costs.
Welcoming the policy, Shah Muhammad Ashequr Rahman, FCA, Head of Finance and Commercial, Bangladesh Honda Private Ltd, earlier said, “There is huge potential for development of backward linkage industry in the country because this is not feasible for manufacturers to make all the required items for a motorcycle.”
“The industry required the policy for sustainable investment and we got it, and now the most important this is its prompt execution,” he said adding: “The financing for backward industry is much essential and the banks should come forward in this regard.”
There are a number of foreign vendors who want to relocate their plants and looking for low-wage destinations and Bangladesh can be a right choice for them. They can invest here at joint venture with local investors, Ashequr said.
Honda has many vendors in different countries like China, Japan, India, Thailand and they can also invest here in joint partnership with prospective local manufacturers, he added.
“This would help manufacture of quality components, which is much essential for the motorcycle manufacturers. Besides, they can export to other countries,” said Ashequr.
For proper implementation of the policy, the government should help create the market by enhancing sales of bikes. But the prevailing high registration fee (of 20 percent) is a hurdle to this end, he said suggesting the government to reduce the fee to a affordable level like that in neighbouring countries where it accounts to Tk 4,000-5,000.
“Present slab system in payment of registration fee is not a convenient one rather it causes high management cost for the government,” he added.
Enhancing the capacity for growing as an automotive manufacturer is a primary stage of becoming a heavy vehicle making country, he said adding, Bangladesh has high potential in the sector as the economy and the manufacturing sector is moving forward faster with right policy support of the government.