Manufacturing of motorbikes in the country is set to grow faster with the reduction in import duty under the ongoing fiscal 2016-17 on import of motorbike parts to assemble in the country.
The government has reduced the duty by up to 20 percent to allow the cost of buying and it has in turn increased sales to a large extent. Local assembling and sales have already jumped to two lakhs unit in 2016 and sales may grow up to 2.8 lakhs in 2017, as the industry sources said.
Business sources said bank and financial institutions should give low cost loans to buyers who are mainly younger people in business and office goers. Moreover the industry should grow more backward linkage industry around the main assembling plans to bring the sector booming at a faster rate.
Eight firms, including Japan’s Honda and Suzuki and India’s Bajaj, TVS and Hero, are set to establish facilities to manufacture motorcycles in Bangladesh after the duty benefits.
The development comes after the National Board of Revenue at the start of the fiscal year offered 20 percent duty rebate on import of motorcycles in completely knocked down (CKD) format for firms that want to sign up as progressive manufacturers.
As progressive manufacturers, the firms would require two years to build the parts locally from the third year onwards they can manufacture some of the components locally.
In response, Bangladesh Honda Private Ltd (BHL), Speedoz, Uttara Motor Corporation, Menoka Motors, TVS Auto Bangladesh, Aftab Automobiles, Rancon Motorbikes and Niloy Motors applied for permission to the industries ministry for the privilege.
After getting the scope to import motorcycles in CKD form at reduced duty, most of the firms have cut the prices of bikes in the last two months. The price cut has also buoyed demand and contributed to the expansion of the overall market; nearly two lakh units were sold in 2016, according to industry insiders.
TVS has already passed on the benefits of reduced duty to customers. The firms that got the benefit have cut prices by 10-18 percent depending on models. The joint venture between Japan’s Honda Motor and Bangladesh Steel & Engineering Corporation is producing the most popular 100-110cc bike, which now costs Tk 1 lakh to Tk 1.20 lakh, down from Tk 1.20 lakh to Tk 1.42 lakh.
Demand has risen as cost fallen. The overall market size has expanded, the industry insiders said.
They said the overall motorcycle market will increase to nearly 2.8 lakh units at the end of 2017.
But they said the rise in demand will substantially grow if banks and leasing firms start financing buyers for purchase of the two-wheelers. Citing example of India, Pakistan, Sri Lanka and Vietnam they said banks and leasing companies propelled the expansion of motorcycle market by offering financing.
Without the expansion of the market to five lakh units a year, backward linkage industry for manufacturing spare parts and other components will not be viable, Chairman of Uttara Motors Matiur Rahman said. They are local assembler and sole distributor of Bajaj Auto n Bangladesh.
Uttara Motors is taking preparations to start manufacturing of motorcycles, he said
Industry insiders said a medium term policy will give idea to investors about the government’s vision for the sector. It may be at least for a period of five year, he said.
He also urged the NBR to impose import duty on basic raw materials at 1 percent and semi-finished and finished components at 5-10 percent so that local assembling plants can reduce the prices of bikes to attract buyers and expand the market.