Making of the two-wheeler manufacturing pioneer
Localisation has reduced motorcycle prices by around one-third on average in the last four years
Runner Automobiles took risks, went beyond assembling of all imported parts and opened a motorcycle manufacturing plant, leading the way in localisation of the two-wheeler industry.
Thus, the spirited dream of Runner Automobiles Chairman Hafizur Rahman Khan has come true. "If Bangladesh can produce the world's best cricket all-rounder, why not motorcycles?"
All other popular brands in this region have lately followed Runner, once a lone warrior for localisation of the motorcycle industry.
Keep updated, follow The Business Standard's Google news channel
Japanese Honda, Suzuki, Yamaha and Indian Hero, Bajaj, TVS and Chinese Lifan – all now have factories here, mostly of manufacturing, while some of their models are an assemblage of imported, completely knocked-down (CKD) parts.
The supportive policy
The government policy has made locally-manufactured units cheaper and imported ones costlier on roads. Khan had long been advocating for that.
Progressive manufacturing policy for two wheelers, implemented in mid-2017, acknowledges a motorcycle model as a locally-made one only if its metallic core structure – frame, swing arm – is welded in Bangladesh.
The more the parts are produced or sourced locally the less the duty burden on unit prices.
Some models are imported as CKD parts and later assembled in a local line. In that case, an assembler has to pay 90-113 percent in duties and taxes on import values, meaning that around half the unit price is taken away by the government.
On the other hand, manufacturers are paying around one-third of the ultimate cost in duties and taxes mainly against their imports of semi-finished raw materials and parts which are yet to be produced locally.
The cost composition of an imported completely built unit (CBU) is simply an inverted one – above 150 percent duty on import prices.
Thus, localisation has reduced motorcycle prices by around one-third on average in the last four years.
They dare to manufacture instead of trading imported CBUs
In 2000, Runner began its motorcycle journey through selling imported Dayang bikes. The Popular Chinese brand had emerged as a Honda follower at its home.
The company later entered technical collaboration agreements with Indian LML, American United Motors, and Italian Piaggio to assemble its two world famous brands – Vespa and Aprilia.
Runner, however, began assembling in 2009 and later opened the manufacturing plant in 2012. Before that, it was happy with the mere assembling of all imported parts.
At the time, only Walton dared to go beyond assembling but later opted out to better focus on their businesses with edges – refrigerator, electrical appliances and nowadays consumer electronics.
Runner, the manufacturing pioneer, is still ahead of its competitors in terms of local value addition and the number of models and brands from a Bangladeshi plant.
"Around two dozen motorcycle and scooter models are being shipped from our factory. It is the most diversified plant in our industry," said Hemant Kumar, general manager for technical operations at the company.
The Indian national is applying all his experience acquired from the two-wheeler industry in his home country over two decades.
Runner brand motorcycles and scooters are being manufactured there. And the rest --- UM, Vespa and Aprilia --- are at least painted and assembled in the Runner plant.
The Business Standard team paid a daylong visit to the Runner Automobiles plant at Bhaluka in Mymensingh recently.
Runner's Production
The factory complex consists of six large sheds used as press shop, weld shop, paint shop, warehouse, and assembly line alongside modern testing facility.
The single shift production there is capable of manufacturing one lakh of two wheelers a year.
The sixth shed is assembling imported Bajaj three wheelers that run on liquefied petroleum gas.
A few hundred yards away, Runner Motors Ltd, the four-wheeler subsidiary of Runner Automobiles, has built an assembly line for Volvo Eicher commercial vehicles manufactured in India.
The Press Shop
The modern press shop shapes all the metal parts to make motorcycle and scooter frames, relevant baby parts which later are merged with other parts in the weld shop – vehicle ancillaries and of course, fuel tanks made of steel tubes and sheets.
The press shop also includes modern robots to cut molds with high precision. The molds are used to shape various metal parts.
The company is still importing metal tubes and sheets for the press shop. It has been trying to source basic raw materials from local steel companies, but they are yet to ensure the specifications.
"The way things are progressing, I am hopeful that we are going to get metallic raw materials from local mills within a year," said engineer Shahnewaz, a member of Runner's research and development team.
"Not only for press shop metals, but we are also in talks with some top local companies who can provide us with other parts and raw materials for our plant," he added.
Like Apex Husain, in technological collaboration with Tourino, is manufacturing very high-quality tyres locally.
It may sound unbelievable, but the company has indeed exceeded Runner's expectation for quality. Only costing is now the issue.
"However, Runner is focusing on commonisation of a wide range of parts that will increase the minimum order quantity and help our vendors to achieve an economy of scale."
Runner's large welding shop
The vast shed equipped with a wide range of welding machines can weld 400-500 motorcycle frames a day.
Hundreds of pre-welding components arrive there and move forward step by step. Engineers hover around the floor while welding technicians are found too busy with their job.
When the welding job is done, the metal skeletons are sent for cooling, polishing, testing and retesting – very importantly for checking the alignment perfection scientifically.
Each of the components and welded parts is chemically washed to remove dirt, dust and rust before these go to the paint shop.
A one-in-the-region paint shop
It is the best paint shop in Bangladesh and is also the a-one-in-the region.
"We have built our paint shop in a way that is capable of doing anything in our arena," said the plant head who had received a series of training at home and abroad over a decade.
The facility was pre-passed one to Italian Piaggio for painting their Vespa and Aprilia models or US brand UM for their cruisers and sporty bikes.
Two chemical engineers explained the process of each function inside the modern paint shop.
Inside the powder coating line, robots keep throwing hot, melted paint powders on the passing by parts in conveyers. Hotter paints metal parts while sophisticated plastic parts are taken care with paints in lower temperature.
Spraying line mainly paints fuel tanks and some other sensitive parts, while powder coating is on stress bearer frame parts.
Coating, recoating is followed by transparent matt or glossy coating that creates a long-lasting strong shield.
Traveling through the conveyer, these come to another large room where later stickers are put on top of the shield.
"We are looking for a scale and later we will get the world's most-advanced painting technologies here," said another chemist at the plant.
Every painted and externally sourced ready part is stored in the no-electricity warehouse from where the supply chain team caters to the assembly line.
Assembly line for two dozen models
It is a huge shed that includes separate lines to assemble engine parts, frame parts, suspension parts, electrical components, wheels, bodyworks and all others.
The plant is capable of assembling 500 units in a single eight-hour shift.
The best thing in the assembly shed seems to be the testing facilities. Engines assembled there now go through a computerised test in the firing unit before these are put on a frame.
Each of the assembled 80cc to 200cc models of motorcycles and scooters is finally sent to the final vehicle testing unit where most experienced engineers and technicians ride those to check top speed, acceleration, braking, suspension and vehicle alignment.
Each of the computerised results is displayed live and the factory is already in a near-zero deviation zone.
For higher segment bikes, an off-plant test ride is more common when the technical masters throw off any complacence.
Own manufacturing versus sourcing from vendors
No brand owner manufactures each of the hundreds of parts themselves, nor does Runner.
Runner's press shop alone prepares more than a thousand different pre-welding components and they do it themselves to ensure reliability.
They do procure many of the remaining parts from a wide range of vendors at home and abroad.
For plastic parts, seats and some others parts, the company is depending on local vendors, while wheels, some electrical components, drive chains and most significantly engine parts are imported.
Local value addition in the Runner's manufacturing plant is now 40-45 percent, which is expected to be 80 percent within next year, said Hemant Kumar.
The import dependency still remains in engine and suspension parts for common models and some sophisticated electronic parts for advanced models coming up at a faster pace.
Engine manufacturing is yet to achieve business viability
Runner had taken an aggressive target to invest in engine manufacturing a few years back. But as a listed company, it opted out of the plan because of business viability, and expanded a three-wheeler assembling facility.
It needs an economy of scale in production as usual.
The segmented market with an annual sale of 5 lakh units in Bangladesh is not enough for a satisfactory return on huge investments to manufacture engines locally, while the competition is with giant vendors in India and China, who are blessed with a very manufacturing-friendly ecosystem.
"But if the market grows to a million units a year, engine manufacturing too will be an option," believes Hemant, the production boss at Runner.
The company's transformation
Runner began its journey under the sole leadership of local visionaries. Later, western investors joined them as private equity partners, who brought more international practices for efficiency and sustainability.
Excellence motto is putting the company on a continuous improvement track in the factory, head office, supply chain and distribution channel.
"We are very serious about sustainability concerning the environment, welfare, and cost control in recent years, said Engineer Shakil, who is working to ensure sustainable practices at the factory.
At the press shop, hundreds of baby parts are being made of cut pieces at the same plant.
The company has already entered the local capital market, which brought a sweet pressure on the management to improve profitability.
The engineering teams, with their diversified training, are also exploring ways for maximising the efficiency in industrial processes.
In the testing facility, The Business Standard team saw around a dozen imported models of advanced technology motorcycles by Aprilia and UM – which will be at least painted and assembled at Runner facilities if the Bangladesh Road Transport Authority approves the types.
The research and development team is working on developing some new Runner models and their research includes metallurgy, vehicle dynamics, ancillaries and features that will help the upcoming models suit local roads the best.
A Runner branded over 100cc scooter model is already on the road and with a strategic price tag below Tk1 lakh and it is gaining momentum.
Runner, once running ahead with the second largest market share after Bajaj in 2012-2014, has now lost its crown to the giant regional brands in Bangladesh since localisation is benefitting each of them with a relieved duty burden – more or less.
The young engineers seem to be stubborn inside the plant and their craze about the new sporty, cruising, commuting models should pay off.
"If we can be a champion in sub 100cc segment, why not in sophisticated segments. Our company is investing more on engineers' training and research," said Shakil, and Shahnewaz seconded him.
"We are already a painting champion for sure. Any industry player can outsource their paint works to our gigantic and most modern paint shop," said the two who hosted the visiting team.
200cc bikes from the plant are being exported right now, which may be the beginning of a revolution if Bangladesh's two-wheeler industry gets a supportive package of policies and sourcing ease.
Runner sold near 32,000 units last year and shipped around 1,000 units abroad, according to Hemant.
This year turned into a bad year for it as a result of a minor market slowdown, followed by the Covid-19 shock.
However, the demand for physical distancing in public places appears as a catalyst for the company to boost sales of its affordable models.
At the same time, the recent cancellation of the Value Added Tax waiver for motorcycle manufacturers again condensing clouds over its head.
The company – desperate to offer a complete range of two-wheeler products and services – most recently has joined hands with Indian Bajaj Auto to sell exiting KTM on-off road bikes in Bangladesh.
