• Friday, Aug 06, 2021
  • Last Update : 09:55 am

Motorcycle industry shows great potential despite pandemic

  • Published at 06:31 pm June 19th, 2021
Motorbikes
Mahmud Hossain Opu/Dhaka Tribune

The industry shows great potential with a steady 60% average increase in collective sales throughout 2015 to 2019

With the ever-increasing traffic and need for private transport, many opt to go for a two-wheeler instead of a car. 

As motorbikes offer fast mobility without putting much of a dent in your wallet for maintenance, the industry shows great potential with a steady 60% average increase in collective sales throughout 2015 to 2019. 

Currently, there are various notable motorcycle manufacturers operating in the market -- Bajaj, TVS, Runner, Walton, Hero Honda, Suzuki, Jamuna Automobiles and others. The Indian Bajaj Auto has been manufacturing locally here since 2015 and was soon followed by the other brands.

As of right before the pandemic, Bajaj had a staggering 53% market share followed by TVS at 12%, Runner at 8%, Walton at 6%, Hero Honda at 9%, and others at 12%. Clearly, one of the biggest challenges the industry is facing is the competition from Indian brands who are currently dominating the country’s entire motorcycle market. 

Bangladesh is one of the world’s top five emerging economies for the next decade, and even though per capita income is still one of the lowest, it is gradually increasing. This month, according to Bangladesh’s cabinet secretary, GDP per capita grew by 9% over the past year rising to $2,227. 

This figure suggests that the country has overtaken the GDP growth of neighbouring Pakistan and India, with a per capita income of $1,543 and $1,947, respectively. This is significant because the rising middle-class and the increase in people’s disposable income suggests it will play a significant role in shaping the motorcycle market in the upcoming years.

However, due to the pandemic, Bangladesh saw a decline in the motorcycle market, the first in years. The market shrank by around 9.3% -- from 550,000 units to 480,000 in 2020 -- which was not much of a surprise. 

With the entire world under the grasp of the novel coronavirus, the global market itself went down 14% from the previous year to 56.5 million in 2020. All the motorcycle markets in different countries around the world were faced with a similar fate. 

India witnessed a fall in sales by 5 million units, Indonesia, the Philippines and Vietnam too experienced a decline with 2.9 million, 0.7 million, and 0.5 million, respectively.

The Bangladesh government was quick to react to the decline in the numbers; to keep the figures steady the authorities came up with a 50% cut on vehicle registrations duty, which has been effective since February 2021. 

On top of that, the motorcycle industry has benefited from a lower VAT rate since 2018. 

There are also hassles involved in taking the vehicle to BRTA (Bangladesh Road Transport Authority); to make the process easier, dealerships should be allowed to pre-register these bikes, but currently, BRTA cannot enable this as there is currently no law that supports this. 

This would also encourage people to purchase more motorcycles. Presently, the import duty for these two-wheelers is 45%, making overall prices to be significantly higher than in our neighbouring countries. 

Major players have therefore established assembly plants locally to lower down the cost of purchase for the end consumer. Honda Bangladesh has invested around Tk460 crore in the last few years, which reflects on the market price of the motorcycles. 

An example is one of their models — the Dream 110 which was priced around Tk149,000 five years ago has come down to Tk89,000 per unit retail, reducing unit prices by more than one-fourth. 

Similarly, all other brands have also experienced this, thanks to the government’s industrial development policy.

Motorcycles are still more expensive here in Bangladesh compared to other regional countries, mainly because of the raw materials which are not locally available, and thus Bangladeshi plants are having to import these parts. 

The cost of import duty and transport add up and that reflects on the final retail price. Runner Automobiles Ltd is the only Bangladeshi manufacturer which exports its bikes overseas but is not able to cope with competition very well. 

According to market leaders, manufacturers should establish local backward linkages by domestically manufacturing the majority of the components and parts. 

There have to be investments made in parts and components manufacturing, and the government needs to provide incentives as without these supporting industries the motorcycle industry as a whole will not be able to flourish to its utmost potential. Only then Bangladeshi manufacturers will be able to be price competitive in a severe price-sensitive market.

There are also only a handful of financial institutions that offer financing options for buying motorcycles which curves out a huge chunk of potential customers. There are a few banks like BRAC Bank and City Bank, HSBC, Uttara Bank and Prime Bank who have recently started giving out loans, however, financing up to 80% of the bike’s retail value. 

In order to kick-start the sales again back to their original state, loans should be made more available. Most consumers in Bangladesh consider purchasing a motorcycle as an investment and paying around Tk90,000 to Tk1 lakh is not an easy thing to do for many.

The sudden slump in the market is expected to be turned around by the end of 2021, as offices and workplaces might start to reopen after the COVID-19 vaccination process gains momentum again. Many are likely to avoid public transport as much as possible if they can afford a personal vehicle which is more preferred for social distancing. 

One of the key reasons for the increase in sales is the increased usage of smartphone devices, as ride-sharing apps such as Uber moto, Pathao and Shohoz are becoming increasingly popular among the mass. This enables us to hypothesize that increasing smartphone penetration and ride-sharing apps gaining more popularity helps continue motorbike sales. 

Local market leaders suggest if the government takes measures to address these prevailing problems, it would not be long for the market to cross the million-unit milestone. 

53
Facebook 51
blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail