The government is framing a policy to facilitate the development of motorcycle manufacturing industry in Bangladesh to meet the domestic demand for low-cost modes of transport as well as to expand the export basket.
The draft policy has targeted to locally manufacture 5 lakh motorcycles a year by 2021 and double the number by 2027.
“The mission is to achieve the capacity for meeting the domestic requirement by 2027 and develop a modern and competitive vendor (component maker) industry helpful for motorcycle industry,” said the industries ministry's draft policy.
The policy is being framed at a time when the demand for two-wheelers, which allows quick moving in both rural and urban areas, is spiralling.
In 2017, 3.6 lakh units were sold, up 50 percent year-on-year, according to industry insiders.
Bangladesh has 14 lakh registered motorcycles, said the draft. Manufacturers and assemblers said they have been demanding for a policy for long as they want a clear idea of the government's position before making the large investment.
High investment is required to establish motorcycle manufacturing facilities, according to Biplop Kumar Roy, chief executive officer of TVS Auto Bangladesh.
Foreigners feel safe investing if there is a long-term policy, said Matiur Rahman, president of the Bangladesh Motorcycle Assemblers and Manufacturers Association. “The policy will attract foreign investment into the sector,” said Rahman, also the chairman and managing director of the Uttara Group of Companies that markets Indian Bajaj brand motorcycles.
The draft policy has sought to provide reduced duty benefits for motorcycle manufacturing. It wants to apply 1 percent duty on the raw materials of components of bikes.
Rahman said vendor development is vital for capacity expansion of motorcycle manufacturing.
Hafizur Rahman Khan, president of the Bangladesh Motorcycle Manufacturers and Exporters Association, called for steps to facilitate making components locally.
The policy should contain a detailed guideline for development of motorcycle component manufacturing industry and also have a provision that ties motorbike manufacturers into using a certain percentage of locally-made components.
“A company cannot become successful in this trade by making all the components by itself,” he said, adding that the prices of bikes will decline for complete local manufacturing.
Some components like the battery, chain and seats are made in Bangladesh now.
The draft policy said horizontal production strategy is necessary for large scale production.
The finished product of one industry is used as raw material of another factory in this sector and one production unit creates demand for another unit.
The backward linkage industry will be developed on a priority basis as it is not feasible for manufacturers to make all the required items for a motorcycle.
Financial and technical support will be given to mould and spare parts makers in the first phase, it said, adding that incentives will also be provided to component makers.
The draft also seeks to provide duty benefit to export-oriented firms to import capital machinery and spare parts. The privilege will be given for at least five years, it added.
Khan, also the chairman of Runner Group that started exporting bikes recently, called for incentives from the government for exporting motorcycles.
“Currently, a tariff benefit is given for importing motorcycle components. But such benefits given under a long-term policy will be instrumental for sustainable development of the sector,” Roy said.
Lower motorcycle registration cost and easy loans for bike purchase are also needed for expansion of the market, he added.
Yuichiro Ishii, managing director and chief executive officer of Bangladesh Honda Private Ltd, said a road map supported by the strong visions for greater industrial developments will be helpful for the sector.
“Based on our long motorcycle experience in the other countries, we strongly believe in Bangladesh's future potential towards the motorcycle industry, thanks to the long-term economic growth rate and large population,” he added.
Yasmin Sultana, joint secretary of industries ministry, said the draft has been sent to stakeholders for opinions.
She expects the policy to be finalised by this year.