‘More efficiency in backward linkages crucial for two-wheeler industry growth’
Entrepreneurs also pointed out that the registration fee for two-wheelers in Bangladesh is much higher than in many other countries
A lower registration fee for motorbikes and higher efficiency in backward linkage factories are crucial for the continued growth of the two-wheeler industry in Bangladesh, said entrepreneurs on Wednesday.
They pointed out that the registration fee for two-wheelers in Bangladesh is much higher than in many other countries, which is increasing the total price of motorbikes at the customer level.
Besides, further development of backward linkage factories – which manufacture different parts for motorbikes – is essential for ensuring that the two-wheeler industry goes forward, they said.
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Addressing a webinar on the subject, "Two Wheeler Industry; Road to Self Sufficiency", organised by The Business Standard on Wednesday, speakers also emphasised the need for granting loans to potential customers for purchasing motorbikes and ensuring proper training of riders.
Sharier Khan, executive editor of The Business Standard, moderated the event.
Matiur Rahman, president of Bangladesh Motorcycle Assemblers and Manufacturers Association, said, "The biggest challenge faced by this industry is the further development of the backward linkage factories that manufacture different parts for two-wheelers.
"These factories need more investments. Otherwise, we will get stuck. The government should help develop such factories by providing them with incentives and technical support."
He added, "The process of assembling motorbikes has been taking place in Bangladesh since before 1980. But we have remained stuck on just assembling motorbikes for decades because there was no policy to incentivise the sector so that it could move forward. And so we became stagnant.
"Later, in 2017, the government amended a policy and provided some facilities to this sector. This move allowed around eight to ten entrepreneurs to shift from assembling to manufacturing motorbikes."
Matiur continued, "Before 2017, no more than 2-2.5 lakh two-wheelers were sold from this sector, and each motorbike used to cost around Tk2-3 lakh. In the next two years, sales increased to 5.2 lakh. This figure proves that the market has opportunities and long-standing potentials."
He added that the sector will advance further if the entrepreneurs get more facilities. "I firmly believe that Bangladesh will be able to manufacture 10 lakh motorbikes by 2022."
Hafizur Rahman Khan, president of Motorcycle Manufacturers and Exporters Association of Bangladesh, said, "A large part of the industry has suffered significant losses due to the Covid-19 pandemic. But the government gave us loans at low interest rates to tackle the crisis.
"Because of the virus outbreak, our sales suddenly became zero in April. Sales reopened slightly in May, and numbers improved further in June. However, in July, sales went down again."
He added, "This industry depends on our per capita income, and pricing our motorbikes at the lowest possible rate also plays a significant role here. But high registration fees are preventing us from doing good business even after the Covid-19 [lockdown]."
Hafizur said it is crucial to lower registration fees to allow the continued growth of the two-wheeler industry in Bangladesh.
Nagendra Dwivedi, chief operating officer of HMCL Niloy Bangladesh Ltd, said, "India has a big market for motorbikes due to its government's intensive patronage of this sector. Under an automation policy, the Indian government has invested a lot on skill development.
"If you want to support your vendors, you must supply them with skilled manpower. And for that, you need to build necessary institutions and ensure proper investment."
Considering Bangladesh's population and per capita income, there are many opportunities for an expansion of the motorbike market in the country, Nagendra Dwivedi said.
Shah Muhammad Ashequr Rahman, head of Finance and Commercial at Bangladesh Honda Private Ltd, said, "Use of motorbikes has increased amid the Covid-19 outbreak due to cheaper transportation costs. We are trying to decrease the price of motorbikes by manufacturing them in Bangladesh."
He added, "When calculated in taka, the registration fee for motorbikes is Tk4,700 in Vietnam, Tk3,776 in India, Tk2,068 in Pakistan and Tk1,132 in Malaysia. But in Bangladesh, the registration fee is Tk22,789.
"It is difficult for many to save up Tk80,000-Tk90,000 [for buying a motorbike]. So, there should also be a retail financing system for potential customers."
Fahim Adnan Khan, head of corporate affairs at Rancon Motorbikes Ltd, said, "If restrictions remain on higher CC motorbikes, we will struggle in the export market and face steep competition there. This issue is preventing us from road testing higher CC motorbikes manufactured in Bangladesh.
"When an industry faces restrictions, it becomes difficult for them to secure foreign investment, even if they make their best efforts. Besides, restrictions on sales of higher CC bikes in the local market negatively impact their sale in outside markets.
He added that the restriction on higher CC motorbikes is impeding training in human resources and of riders in this sector. A rider needs to be skilled and trained to ride a higher CC motorbike.
Tazul Islam, chairman of Run Industries, said, "Domestic demand cannot be met with import-dependent products. Our companies are importing motorbike parts and assembling them here. The reason this industry is making headway is that the government has given it tax exemptions.
"Aside from a handful of backward linkage vendors, the rest have experienced little development so far."
