Electric vehicle gets incentive package for local manufacturing

The interim government has announced a package of duty benefits to promote local manufacturing of green vehicles and their batteries, a move warmly welcomed by industry insiders after much-awaited policy support which was expected last year.

The incentives are expected to attract investments in green mobility, replicating the success of localisation in fossil fuel-powered two-wheelers, three-wheelers, and cars, industry experts said.

Following the finance adviser's budget speech on Monday, the National Board of Revenue reduced the total duty and tax burden to around 33% for electric or hybrid cars manufactured locally with a certain level of investment and value addition.

Currently, imported electric cars and fuel-efficient plug-in hybrid cars up to 1500cc face an 89% duty burden.

In 2022, the government announced duty cuts to encourage localisation of petrol cars, prompting Hyundai, Mitsubishi, and Kia to establish local plants, which lowered prices and boosted sales of several models.

Similarly, electric bikes, which save significant energy compared to petrol models, face about a 37% duty burden if imported directly. The government has reduced this to roughly 11% for locally made e-bikes.

As part of its goal to achieve a 30% electric vehicle market share by 2030, the government has also introduced significant incentives for lithium and graphene batteries used in green vehicles.

Bangladesh, one of the lowest adopters of green mobility, has seen rising demand for energy-saving vehicles, especially since petrol prices surged in August 2022.

Due to the lack of a robust battery charging infrastructure nationwide, many buyers prefer hybrid cars over fully electric vehicles.

However, with the launch of global market leader BYD EVs last year, the market is expected to evolve rapidly. The world's largest e-bike maker, Yadea, and several other brands are also now available locally.

Local manufacturing is expected to reduce unit prices and improve market penetration, said Mostafizur Rashid Bhuiyan, Executive Director of Rancon Group.

Rancon's state-of-the-art factory in Gazipur currently assembles and paints Mitsubishi and MG cars, with plans to gradually increase local value addition.

"We aim to localise some plug-in hybrid cars, as demand is rising quickly due to their fuel efficiency. Localisation could reduce prices by 20%," said Bhuiyan.

Bangladesh Auto Industries Limited has built a factory in Chattogram for complete EV manufacturing and has been awaiting supportive policy measures.

Chery car distributor Asian Motorspex Limited is also building a local factory and plans to produce a plug-in hybrid car locally, subject to approval from its principal brand, according to Managing Director Sajedur Rahman.

Runner Group, which sells BYD EVs, plug-in hybrids, and Yadea scooters, is exploring localisation opportunities similar to those for Vespa scooters, UM motorcycles, and its own Runner brand of two-wheelers.

Md Aminur Rahman, head of Commercial and Corporate Affairs at Runner Group, told TBS that the revenue board has imposed several strict conditions for the incentives.

"For instance, e-bike manufacturers must produce shock absorbers, electric motors, and batteries themselves, which is not feasible. Brands typically source many parts from specialised vendors with economies of scale," he said.

"The government should relax these criteria; otherwise, e-bike and electric car manufacturing will struggle to attract investment," added Sajedur Rahman.

Bhuiyan expects local hybrid cars to hit the market in 2026 at reduced prices, with fully electric cars following if the government eases localisation requirements.