70% local battery market in hands of clandestine factories

Munawar Misbah Moin, President of the Accumulator Battery Manufacturers & Exporters Association of Bangladesh (ABMEAB), said around 70 percent of the local market for automotive batteries has been captured by clandestine factories.

In a recent interview with The Business Standard (TBS) the director of Rahimafrooz Group – the country's battery pioneer – said illegal and clandestine factories are primarily run by Chinese nationals, in collaboration with local individuals. He said the factories pose a threat to the authorised industry and the environment.

He spoke of the potential and challenges of the export market.

TBS: Please tell us about the local market for accumulator automotive batteries.

Munawar: In more than a decade, the battery market has nearly quadrupled and annual turnover has reached around Tk11,000 crore. The biggest source of the growth is electric three-wheelers – known as easy bikes.

Tk8,000-crore's-worth of batteries are bought for easy bikes annually. The sector has been almost completely overrun by unregistered, non-compliant and clandestine factories – run primarily by Chinese nationals.

They take zero responsibility for the standard of their product, business compliance, and sustainability – which helps them maintain abnormally-low prices for their product. Easy bike owners prefer illegal batteries as low cost alternatives to compliant batteries.

It is impossible for a registered manufacturer to compete with unregistered ones, and thus, around 70 percent of the local market for automotive batteries is in the hands of illegal factories.

TBS: What about unauthorised battery recycling? Recently we reported about the harmful sides of that industry.

Munawar: That, too, is alarming and in the illegal arena. A University of Dhaka study identified over 450 unauthorised battery recycling centres across the country, which are destroying the environment and increasing health hazards for local people.

Photo: Salahuddin Ahmed/TBS

There were fewer than 15 such factories a decade ago. The drastic increase is also a consequence of the emergence of illegal manufacturers.

We used to recycle batteries and pay Tk1,000 for an abandoned one. We recycle them at a Department-of-Environment-compliant facility.

Non-compliant counterparts pay more for the old pieces and spend nothing to set up a recycling facility. They prefer to hire ill-informed people at the unauthorised hubs, at risk to the environment, plus the workers' health and lives. 

TBS: Have you spoken to the government about this?

Munawar: Yes, we – the association members – have identified around two dozen such factories and shared their details with the Ministry of Commerce and Department of Environment.

There were some crackdowns on unauthorised factories, but they soon relocated elsewhere. They do not have to work too hard [to re-establish themselves] as the Chinese nationals have local collaborators. 

We have also raised the issue at meetings with the Chinese embassy, urged their businessmen to work within a legal framework, and invited the businessmen to become members of our association.

We are hopeful that for the sake of the compliant industry, and to earn revenue, the government will successfully stop all clandestine factories.

TBS: How about Bangladesh's exports?

Munawar: Bangladesh is currently the third alternative name as a source country for the importers of dozens of countries.

To reduce their excessive dependence on Korea, importers have diversified their source countries.

After South Korea, China and Indonesia hold the first two positions as source countries for batteries. Bangladesh is the next name on the list – mainly for traditional lead acid and sealed maintenance-free batteries. Bangladeshi batteries are treated as ones of high standard.

Photo: Salahuddin Ahmed/TBS

We shall have to focus on manufacturing and exporting lithium-ion batteries for electric vehicles after they are on our roads.

There is great potential for exports.

However, I must say, there is huge competition, especially when you are fighting export giants like China and Korea.

Any local group well-positioned in exports will tell you about their struggle in the first half decade of their business abroad. It really takes time.

Our family group, Rahimafrooz, began its battery journey decades ago. Still, we contribute to around 80 percent of Bangladesh's battery exports. I feel we should receive some more support from the government.

In 2009, we invested Tk150 crore in building a 100 percent export-oriented factory in Pabna. The government gave us a tax holiday facility along with the ready industrial plot and some other things. However, we did not benefit from this because of losses in exports due to initial export entry struggles. 

Now the government is offering better support for the factories outside of Export Processing Zones (EPZ). It is profitable to export from non-EPZ factories.

I feel the government could do something more for EPZ factories to keep maintain their strength. They are foreign currency earners and brand ambassadors for the country's industrial capability. 

Any source of new diversified export earnings should receive all benefits –irrespective of its factory's location.