Let people afford cars to help flourish local industry

The era of Bangladeshi cars is already here.

In line with the economic status upgradation, Bangladeshi entrepreneurs have begun showing their courage to make cars here and consumers are giving their full-hearted support for "own cars".

PHP Automobiles Ltd, which launched the first-ever affordable cars assembled locally a year ago, saw its first batch of cars sell out in a surprising span of just 45 days.

The home-grown group, which previously championed float glass production and exports, was planning for six months to sell the first batch of the Malaysian Proton branded cars considering the pandemic situation.

Hossain Group of Industries, another local business house, is going to launch the first-ever local branded car – Bangla Car – next month. The market attention and pre-booking statistics for the locally assembled premium cars with much lower price tags are very inspiring for other companies that are planning big investments in the car industry.

This is just the beginning of a brave journey and the industry is facing lots of challenges, said industry people while talking at a recent pre-budget webinar organised by The Business Standard on the potential and challenges of the car industry.

"Our car industry is in a stage where our readymade garments industry was three decades ago," said Zakir Hossain, managing director of Bangla Cars Ltd.

Like his other industry partners, he also believes in the potential of Bangladesh as a car market and also a hub for manufacturing and exports.

Shrinking market is the major concern

The market size is the biggest hindrance here for the car industry to flourish, discussants said, blaming the government philosophy to treat cars as luxury items and impose duties and taxes at punitive slabs, such as 128% for 1600cc cars and up to 800% for over 4000cc cars.

Due to discouraging tariffs, the car market in Bangladesh has been shrinking for the last four consecutive years and the annual sale of sedans came down to 10,000 units, down from 23,000 units in 2017, according to Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida) President Abdul Haque.

"Our car market rolled back to the size that it had a decade ago," Abdul, a car market veteran, said.

Car manufacturing is not a feasible business until a market absorbs one lakh units a year, he said citing from industry studies, adding the government needs to enable the market to buy at least 50,000 cars each year within a decade and one lakh units within the next two decades.

Bangladesh needs to protect the interest of local carmakers and also the rights of consumers to buy a wide range of cars of their choices, he said, suggesting the focus should be on market growth through tariff rationalisation both for reconditioned and brand new cars.

The desired face of Bangladesh's car industry

Keeping the smaller local market in mind, Bangladeshi plants must eye regional markets that are importing cars from other countries, said Mohammed Akther Parvez, managing director of PHP Automobiles Limited.

Only assembling imported car parts was not a feasible business for Hossain Group and that is why they dared to make own branded cars in collaboration with Japanese, Chinese, and Indonesian technology partners, said the Bangla Cars managing director, expressing high hopes for exports in future.

On the other hand, regional countries like China, India, and some South-East Asian nations that have built their trillion-dollar car industry value chain targeting both local and export markets will not leave sufficient space for the nascent plants in Bangladesh, feared the Barvida President.

Very importantly, only assembling will not take the car industry far and it needs collaborative efforts for developing component manufacturing here in a prudent and practical way, said Abdul Matlub Ahmad, president of Bangladesh Automobiles Assemblers and Manufacturers Association (BAAMA).

Three to four decades of only assembling buses and trucks did not help grow the local automobile industry, said Matlub whose Nitol Niloy Group is assembling Tata commercial vehicles and leading the local market.

His group is also importing Tata cars and planning to begin assembling those locally in the coming days.

Uttara Group, another automobile house, is going to build an assembling plant to make Suzuki cars in Chattogram.

"The car industry needs gradual localisation, which is being observed in the two-wheeler industry of the country. Otherwise, only assembling will lead to a 'no-industry' practically," said Abdul.

Localisation is on its way to some extent, said the PHP Automobiles managing director as his company, approved by the parent company, is already manufacturing 26 Proton car parts in Chattogram. PHP is waiting for a similar approval to locally manufacture several hundred more parts while it is currently painting, assembling, and controlling quality of Proton cars.

Right policies and ventures are needed to attract global component manufacturers here which would cater to the local industry and also unfold the potential for component exports, Matlub said.

There are more than a million units of battery-run auto-rickshaws and a similar number of fossil fuel-driven three-wheelers on local roads and they all are imported, Haque said, adding Bangladesh missed the chance to cater to the huge market from local plants.

A joint effort from policymakers and the industry would avert such misses of opportunities, discussants expressed hope.

Haque, the leader of Japanese reconditioned car importers, also cautioned against embracing outdated or poor technologies in the local car industry.

Electric vehicle revolution and Bangladesh

A 100-year-old telecommunication industry witnessed a revolutionary change in two decades since the mid-1990s as cellphone technologies evolved.

A similar shift towards electric vehicles is expected across the globe in the next decade while developed car markets are planning to go solely electric a decade later and have already popularised electric cars among the masses.

Bangladesh has its full potential to ride the coming wave, believes Mir Masud Kabir, managing director of Bangladesh Auto Industries Ltd.

His company is building an electric car manufacturing plant in Chattogram and expects to test some of its eight electric car prototypes this year.

Over the last four years, Kabir's team has been putting in full efforts on research and development in collaboration with international partners both from the East and the West.

Nitol Niloy Group is also planning big on electric car making here.

Bangladesh Auto Industries is going for full-fledged local manufacturing as it will weld chassis, build car bodies, paint, and assemble everything at its Chattogram plant.

They will also manufacture electric motors, controllers, lithium-ion batteries, and chargers themselves, announced Masud, thanks to the entrepreneur's strong technology background at home and abroad while his company is researching hard.

The Business Standard Executive Editor Sharier Khan, who moderated the discussion, said lithium-ion battery manufacturing can be a game changer not only for the car industry but it can also flourish as a bigger industry if companies can acquire technologies and manufacture for home and export markets.

Should electric cars hit local roads, charging stations and ancillaries can emerge as a big business here, he added.

Policy expectations

Haque expects that the government would realise the need for market growth and rationalise duties and taxes on cars.

Matlub advised focusing on the practical localisation options as car making is not a shallow-pocket players' game.

The government needs to facilitate component makers' ventures and industry players must collaborate for the sake of feasibility, he added.

Kabir categorically sought three things in the upcoming budget which would enable Bangladesh to futureproof its car market and also the potential industry. Like other developing and developed markets, he said the government should incentivise electric car buyers, impose zero duties on the imports of basic raw materials for electric cars and their components, and set a rational and competitive duty structure for intermediary raw materials, which prevails to incentivise the local two-wheeler manufacturers.

Offering the component makers zero duty on raw materials and exemption from value-added taxes and corporate taxes would help the industry attract world-class original equipment manufacturers to set up plants in Bangladesh, Kabir added.

Matlub sought the same for the entire car industry instead of only for electric cars.

Parvez, driven by his dreams for car exports, requested government efforts for enabling car exports to regional countries like Nepal and Sri Lanka under the regional free trade framework.

Zakir suggested a bond facility for carmakers to flourish as such a facility helped the apparel industry lead the world.

Kabir, educated and trained abroad, urged the government to launch a special skill acquisition programme where stipends will be allocated for 1,000 talented people to go abroad and learn from global factories as well as research and development centres.