Tuesday, 5 July, 2022

Burgeoning automobile industry

It is a positive sign for the economy that the annual turnover of the country’s automobile industry has reached Tk. 40,000 crore as a result of the rise in purchasing power of the people. To meet the growing demand of cars and motorcycles, the government encouraged setting up of local motor vehicle assembling plants, instead of importing completely built-up units of vehicles. As a result the sector has drawn huge foreign and local investment. 

Nearly a dozen companies are assembling motor vehicles in Bangladesh. The sector expanded following the government’s decision to cut duty on import of vehicle parts in completely knocked down (CKD) format. Thus it has encouraged both local and foreign investors to enter the country’s automobile industry.

The more vehicles are manufactured or assembled locally, the less we need to import cars. Needless to say that it will create jobs and enable local companies to gain much-needed knowledge and experience about motor vehicle manufacturing. In this way one day we will be able to produce our own Bangladeshi brand of cars.

However, assemblers are facing the biggest challenge from second-hand and duty-free car importers. The authorities concerned may consider totally banning importation of second-hand or old cars. Besides, misuse of duty-free import facilities of cars need to be checked.

Apart from providing proper policy support to assemblers, the government should also pave the way for the growth of component manufacturers, those who make components for vehicles. Currently, most of the components as well as parts of motor vehicles are imported. The backward linkage industry is vital for manufacturing business to thrive.

Investors in the sector said that the government’s policy support has significantly contributed to the growth of the country’s automobile industry. They expect that the favourable policies which have been taken so far including the existing tax structure  will be kept unchanged for a certain period of time. A stable policy helps create confidence among the entrepreneurs, whereas policy flip-flop erodes investors’ confidence.

The potential of our automobile industry is huge. A number of the investors in this sector have already started exporting locally made vehicles. It is hoped that Bangladesh could become a regional hub of automobile manufacturing by 2030 if the sector’s current growth momentum prevails.