Honda starts exporting motorcycles from Bangladesh

Coming as a boon during the country's economic crisis, motorcycle brand Honda, a name synonymous to all brands of motorcycle in Bangladesh, has started exporting motorcycles from its plant in Gazaria, Munshiganj today (3 September).

Bangladesh Honda Private Limited (BHL), a joint venture of Japanese Honda Motor Company and state owned Bangladesh Steel and Engineering Corporation, shipped 14 Honda X Blade 160 commuter motorcycles, by sea, to the rising Central American market of Guatemala.

This makes Honda, the global leader in motorcycle manufacturing, the second company to export motorcycles from Bangladesh, following Runner Automobiles. The move is seen as a step towards boosting the country's foreign exchange reserves, which have been under pressure in recent times.

Gradually BHL will explore opportunities in other markets in the Americas and Africa.

During the export launching ceremony at the BHL plant, officials said the company requires substantial foreign currency to import raw materials and knocked down (KD) parts to manufacture motorcycles in Bangladesh, and the ongoing foreign currency crisis made it difficult to meet the growing demand for Honda motorcycles.

BHL Managing Director and CEO Shigeru Matsuzaki said, "The solution to this challenge lies in our two-pronged approach – increasing local procurement and initiating exports to earn foreign currency that should add to Bangladesh's economic resilience."

Honda has production facilities in 21 countries including Bangladesh. "However, the production capacity and cost competitiveness here is comparatively low due to the stiff competition within a moderately sized market and the country's import dependency for raw material and components," said BHL Chief Marketing Officer Shah Muhammad Ashequr Rahman.

He told The Business Standard, "For instance, excluding the duty on imports of raw material and components, Honda's manufacturing costs in Bangladesh is over 10% higher than the bigger two wheeler manufacturing hubs in the region."

Still, to cement its ties with Bangladesh, Honda eyes a greater contribution to the country's journey towards cost effective manufacturing that needs a larger scale and more local value addition alongside exports together would help the mission, he added.

The Bangladesh government currently offers a 0.05% cash incentive on motorcycle exports, which Shah Muhammad Ashequr Rahman, who is also a professional accountant, described as insufficient to offset the higher production costs.

For export competitiveness, the company has an option to seek duty-free imports of raw material and components or go for duty drawback post exports, he added.

Both have different problems, he said. 

For a bonded warehouse to enjoy duty free imports for the export unit, the company will have to make further gigantic investments. On the other hand, duty drawback procedure event takes more than five years post export in Bangladesh to get back the already paid duties and that might require several hundred crore takas in additional working capital, he explained.

"To become competitive in motorcycle exports, we need duty free imports of raw material and components against bank guarantees only," said Ashequr, who has a long experience in the company's finance department too.

BHL actively seeks support from the National Board of Revenue (NBR), Duty Exemption and Drawback Office (DEDO), and its banking partners in the bold export mission, he added.

BHL Chief Production Officer Hiroyuki Yasunaga, said just like the other Honda plants, the manufacturing standards and quality control are equally rigorous in its Bangladesh plant.

Bangladesh's Motorcycle Industry Development Policy 2018 eyed a manufacturing scale of 10 lakh units a year by 2027. Having peaked at 6.4 lakh units in 2021-22, the home market sales dropped to less than 4 lakh in the 2023-24 fiscal year due to the economic slowdown post Ukraine war.

The two wheeler market in Guatemala recorded 12th straight years of highest ever sales in 2023. Selling more than 56,000 units last year, Honda led the market with nearly one-fourth share. With similar units sold in Bangladesh, BHL held nearly 15% of the Bangladesh market in the fiscal year 2023-24.

Other Japanese, Indian, Mexican and a few low cost local assemblers are also active in the market of Guatemala, which is the 21st largest two wheeler market in the world right now in volume terms, according to motorcyclesdata.com.