Bike makers ride into booming market
SHARIF AHMED
Motorcycle sales year-on-year have increased nearly 3540 per cent to about 4.5 lakh units this year so far, and the conditions are buoyant like never before.
Explaining the reasons behind this upswing, industry insiders said that after the government extended the existing VAT exemption to local motorcycle manufacturers, more firms were coming to establish manufacturing plants in the country.
A business-friendly tariff structure, rising incomes and sourcing of raw materials locally were other factor helping to push up sales, they added.
Mukesh Sharma, managing director and chief executive officer (CEO) of Runner Automobiles Ltd, told The Independent that Runner produces 3,500 units of motorcycles every month and holds 1314 per cent of the market share at present.
Talking about market opportunities, Sharma said, Bangladesh was a growing economy and passing through a phase of demographic dividend when the majority of the population was of working age and could contribute to the countrys economy. More than 75 per cent of the countrys population was less than 40 years old.
Citing an example, he said that approximately 19 per cent households in Bangladesh had motorcycles, whereas the corresponding figure was 47 per cent in India.
In other countries such as China, Pakistan and Thailand 60, 43, and 87 per cent households respectively have motorbikes.
GDP drives sale
He said people were more eager to buy vehicles when a countrys GDP per capita based on PPP (Purchasing Power Parity) was over $4000.
GDP per capita (PPP-based) of Bangladesh was around $4,561, which was directly contributing to a huge growth in the automobile sector of Bangladesh, he added.
So, there is ample opportunity waiting for us to penetrate the two-wheeler market of Bangladesh, Sharma added.
Runner established its motorcycle manufacturing plant in Bhaluka, Mymensingh, where we produce 500 units of motorcycles per day.
Bangladesh imports motorcycles from China and India. It is possible to manufacture all the parts here, except the engines, he added.
If we can increase our capability, its possible to create a revolution in the automobile industry here within two to three years, he felt.
When asked whether Runner exported motorcycles, he said, Currently, we export motorcycles to Nepal and have already opened three showrooms there.
Every month, 1,000 units of motorcycles are being exported to Nepal, he said.
Explaining Runners future plans, he said, the company would gear up their manufacturing process of better quality bikes and add value such as the Cruiser brand and Caf Racer. We will lay greater emphasis on quality products and performance in the near future, he indicated.
Biplob Kumar Roy, chief executive officer of TVS Auto Bangladesh, told The Independent that in the proposed budget of FY 2018-19 the government had extended the existing VAT exemption to local motorcycle manufacturers to attract more investments and boost exports.
Market penetration
He said, as a rule of thumb, when a country notched up a GDP above 6 per cent, 20 per cent market penetration of vehicles was expected to be achieved every year.
Our motorcycles sales have risen 80 per cent over last years, Roy informed.
Describing the market size of motorcycles, he said, Approximately, 4 lakh units of motorcycles have been sold in 2018. If I assume that an average motorcycle costs Tk 1, 25,000 then the market is currently worth around more than Tk 4,000 crore.
About market opportunities, Roy said, Two-wheeler penetration in Bangladesh is still very low if we consider our population and economic growth. Hence, there are ample opportunities waiting for us to penetrate the market.
Pointing to the challenges before this sector, he said, At present, Bangladesh is in an early stage of manufacturing motorcycles; we need a long-term business-friendly policy in the two-wheeler sector. For, eventually the brands will open manufacturing plants in Bangladesh but we dont have such resources or technical know-how.
Such a policy would drive us to establish backward linkages and support local manufacturing, he said.
Backward linkage
As the industry is shifting its manufacturing process, backward linkages like vendor development will be a great challenge in the coming days, as no company can produce all the parts and components at its own plant, he added.
So, there should be quality vendors that would manufacture components for all companies, and this was the ongoing practice throughout the world, he said. We need to have a proper policy from the government that would support the vendor development process and encourage global vendors to set up their plants here, he added.
Talking to The Independent, Minhajur Rashid Bhuiyan, chief executive officer of Grey MC, said, We are the head dealer of Bangladesh Honda Private Ltd (BHL). We represent Honda for Muhammadpur and adjacent areas.
When asked about the market growth, he said, The demand is growing rapidly for last two years. Our monthly demand in the entire country is around 8,000 units and we have the capacity to supply approximately 6,500 units.
Explaining the reasons behind the growth, he said, motorcycle demand had gone up due to a couple of reasons such as VAT exemption by the government for the local motorcycle manufacturers, lowered supplementary duty on imported parts and components and because of ride sharing apps, which encourages people to buy motorcycles to earn money.
We have dropped the price of each motorcycle is more than Tk 12, 000, he said.
Around 5 lakh units of motorcycles were being sold in Bangladesh each year, he informed.
Honda is opening a manufacturing plant by November this year. Presently, Hero MotoCorp Ltd TVS Auto Bangladesh Ltd and Runner Automobiles Ltd were operating full-fledged manufacturing plants in Bangladesh. Honda, Bajaj Auto and Yamaha were expected to set up their manufacturing plant soon, he said.
About the sourcing of raw materials, he said, Bangladesh sourced 30 per cent raw materials locally and 70 per cent were being imported.
The Honda CB Hornet 160R is the latest model, the highest selling product so far. It is available in all Honda showrooms. It costs around Tk. 199,800, Bhuiyan said.
Runner Automobiles sales executive Obaydul Islam told The Independent that Runner aimed to make low-cost and affordable motorcycles. To make motorcycles accessible and affordable, we provide customers instalment facilities for 12 months, 18 months and 24 months, he said.
The Runner Duranto is the cheapest motorcycle manufactured by us. Its for the common people. It costs around Tk 59, 000, he added.
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