Automobile Industry in Bangladesh: Sun rising for Bangladesh Automotive Industry
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June 11, 2025

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WEDNESDAY, JUNE 11, 2025
Sun rising for Bangladesh Automotive Industry

Industry

Mahfuz Ullah Babu
18 April, 2021, 10:45 pm
Last modified: 19 April, 2021, 12:25 pm

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Sun rising for Bangladesh Automotive Industry

  A roadmap to develop automobile and automotive industry will focus initially on incentivising local assembling, then more on sourcing local components – technically called progressive manufacturing policy

Mahfuz Ullah Babu
18 April, 2021, 10:45 pm
Last modified: 19 April, 2021, 12:25 pm
Infographic: Bangladesh Market for Motorized Vehicles

In less than a decade, the two-wheeler market in Bangladesh grew more than three times. During this period the source of supply shifted from the imports to the local manufacturing which accounts for more than 90% of the units sold here annually.

The government, in collaboration with partner nations, foreign investors and the local private sector, is trying to replicate the motorcycle success story in automobiles which is raising hope for the development of Bangladeshi automobile and automotive industry in coming years.

The roadmap will focus initially on incentivising local assembling, then more on sourcing local components – technically called progressive manufacturing policy.  

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In a  webinar titled " Automobile Industry Development: Present Situation and Future Prospects" organised by the Dhaka Chamber of Commerce and Industry (DCCI) on Sunday the speakers outlined the potentials and challenges on the way to have a strong local automobile and automotive industry which can help diversify exports and the burgeoning economy mature.

Industries Minister Nurul Majid Mahmud Humayun in his speech as the Chief Guest said with the increasing purchasing power of people local demand for vehicles is rising and his government is inviting the foreign and private sector investors to set up vehicle and component plants in economic zones.

Following the Motorcycle Industry Development Policy 2018, the government now is working to finalise the Automobile Industry Development Policy 2020, the draft of which is drawing mixed reaction since that contains a plan to phase out imports of reconditioned vehicles in five years and Bangladesh car market is mostly made of reconditioned Japanese cars due to their perceived reliability and a wide range of models from the top Japanese car brands.  

However, even before the policy is finalised, some top local groups including Uttara Motors, Ifad, Runner, GPH,  in collaboration with their foreign technological partners, have proposed to invest nearly Tk3,000 crore in total to invest in Bangabandhu Sheikh Mujib Shilpa Nagar in Chattogram alone as the emerging industrial park offers a suitable package for automobile investors.

Bangladeshi company Fair Technologies is planning to set up a local Hyundai car assembling plant. Besides, The Ministry of Industries is in talks with Japanese Mitsubishi Motors for a joint venture car assembly plant like the state-owned Pragati Industries' six decade-old vehicle assembly plant, while more than a dozen plans for automotive investments appeared in media reports in recent years.

PHP Automobiles is assembling Malaysian Proton branded cars in Chattogram in recent years to offer little more affordability amid the abnormally high tariff existing in the country.

Some local companies are assembling commercial vehicles too.

The market

Taskeen Ahmed, deputy managing director of Ifad group, in his keynote presentation at the programme said, "Prior to Covid-19, Bangladesh automobile market had been growing at an annual average of 15-20% rate while the auto parts market was growing at 12%. Both the growth rates are way above the respective global averages."

"With the noticeable national infrastructure investments for roads and highways, bridges and tunnels, and regional connectivity initiatives Bangladesh is likely to see a high demand for automobiles, like two-wheelers, passenger cars, light and heavy commercial vehicles or three-wheelers, in coming days too," said Taskeen.

According to the Bangladesh Road Transport Authority (BRTA) there are more than 46 lakh registered motorised vehicles in Bangladesh, while a large number such vehicles, especially two and three-wheelers, are running without registration.

Of the total registered vehicles, nearly 80% are two-wheelers, 5% are passenger cars, while buses and trucks together, pickups, auto rickshaws, vans, microbuses made the remainder of the pie.

The potentials and Challenges

With localised manufacturing in recent years, motorcycles' affordability helped the two-wheeler market to reach the sales of half a million units per year. Industry experts say crossing the milestone of selling a million units annually would enable the local industry to invest more for component manufacturing which is the backbone for a strong industry.

Citing a study by the Japan International Cooperation Agency (JICA), Bangladesh Reconditioned Vehicle Importers Association (Barvida) President Abdul Haque said for a feasible car industry the car market needs to grow to one lakh units a year, otherwise the lack of scale would make the investor companies' task difficult.

Currently 12,000-29,000 units of cars are sold each year in the country.

Bangladesh has full potential to grow the car market at that level if the government rationalise taxes and duties to make cars affordable, said the leader of around 900 reconditioned car importers and dealers of the country.

Bangladesh is a rare country where imported cars face abnormally high duties and taxes that begin from 128% and can go higher than 700% depending on the engine capacity.  

Export of cars would not be an easy task since the regional market is very competitive, opined Hayakawa Yuho, chief representative of JICA Bangladesh.

He advised the government to proceed in phases, firstly incentivising investments which would enable mere assembling, and then gradual pushes for more local component sourcing in line with the growth of the market.

For a stronger car market, a practical combination of both brand new and reconditioned cars would be better, opined Hayakawa Yuho.

A careful sequencing that can help investors proceed with the economies of scale might change the landscape of Bangladesh's industrialisation, he added.  

Component manufacturing has bigger potentials  

Automotive components, a vital part of the government's priority sector light engineering, have even greater potentials both to support the desired development of a local car industry and also in exports, said experts.

Taskeen said in his keynote speech the annual local market for auto parts worth Tk1,400 crore now and it is growing at 12% rate. Around 200 auto parts importers are catering to the demand now.

Globally the component market is even bigger than the apparel market, he said while talking to The Business Standard.

Non-resident Bangladeshi engineer Syed Imtiaz Ahmed, a Detroit automotive technology consultant, said Bangladesh has full potential to contribute to the global market for automotive electronic components.

"For example," he said, "An electronic control unit (ECU) hardware costs around $30 which are used in dozens in a modern vehicle. But global companies spend millions for the software installed in the units."

The government should take initiatives to engage thousands of local computer science graduates to work in the field which can be a big boost as it would enable exports to the developed countries.  

John D Dunham, chief of the Economic and Indo-Pacific Affairs Unit of the US Embassy in Dhaka, said the backbone of the US auto industry is thousands of component makers and Bangladesh should focus there.

Japanese ambassador to Dhaka Ito Naoki said automobile, light engineering and agro-based sectors can play a vital role in Bangladesh's export diversification. He urged the government to ensure policy supports, tax benefits, and incentives to grow the automobile industry.

What is needed now

Matiur Rahman, chairman and managing director of Uttara Group of Companies, which is going to invest around Tk285 crore in a local assembling plant for Suzuki cars, said "We are far behind in this (Automobile) sector. A long term policy and incentives will foster the promising sector."

Md Touhiduzzaman, the managing director of Pragati Industries, expressed the state-owned firm's readiness to contribute more in coming days.

DCCI President and the programme moderator said despite having potentials, the absence of long-term policy and consistent tax structure, lack of domestic source of raw materials and relevant skilled human resources, as well as inadequate backward linkage limit the automobile manufacturing industry's development.

He also urged for a long-term policy and a minimum 5-10 years sustaining tariff policy to support the assembling and manufacturing of vehicles.

He also called for a separate Automobile Zone and allowing joint ventures for parts manufacturing to create local experts.

Economy / Top News

Bangladesh Market / Automotive Industry

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