• Wednesday, Dec 01, 2021
  • Last Update : 12:38 am

Bangladesh is the third-largest exporter of bicycles to the EU

  • Published at 05:26 pm July 3rd, 2021
Netherlands bicyle
Bicycles are parked in a neighbourhood that is decorated in orange for the Euro 2020 football championships in The Hague, Netherlands on June 19, 2021 Reuters

Local bicycle manufacturers riding high from exports but falls behind domestically in the pandemic

The pandemic has caused most businesses to slow down in terms of sales, however, the bicycle manufacturers have lucked out. The demand for them has gone up significantly in foreign markets as more and more people are moving towards using a bicycle instead of public transport. 

“One of our three factories have received export orders for more than 130,000 units in the last five months,” said a high official of Meghna Group. Similarly, RFL also expects around 25% growth in its sales. 

This trend is likely to go up as market research reports estimate that the global market size for bicycles would reach US $62 billion by the year 2024. The European Union (EU) countries are one of the biggest markets for bicycles, where consumers buy around 18 million units a year. 

This is the reason why Bangladeshi manufacturers are targeting the European markets for exports, especially to the UK, Germany, Italy and Netherlands. According to Eurostat, Bangladesh is the third-largest exporter of bicycles to the EU and the 8th  largest exporter in the global market. 

At present, there are three major exporters in the bicycle industry with Meghna Group being the largest among the lot, with three factories dedicated for assembly. Pran-RFL Group also exports its bicycles under the brand name--Duranta Bikes. Pran-RFL is relatively new in the market only having started in 2015 but has gained huge popularity in the domestic market. 

The company has recently expanded its capacity, with its two factories in Habiganj having a combined capacity of manufacturing 600,000 units. The other major exporter is Alita Bangladesh, which is a Taiwan-based company in Chittagong Export Processing Zone. According to Bangladesh Bicycle Merchant Assembling and Importers Association (BBMAIA), the local market demands nearly 1.5 million bicycles a year with an annual growth rate of 30%.   

One might wonder why China’s mighty manufacturing companies are not taking advantage of such a lucrative market. That is because the EU has imposed a high anti-dumping duty with an import tariff of up to 48.5% which was supposed to end in 2018. 

Then, the EU has extended the anti-dumping duties for a further five years to avoid market distortions and to keep the number of imports under check while Bangladesh is currently enjoying duty-free export benefits that have facilitated the performance of bicycle exports. In the last fiscal year, Bangladesh earned $73.22 million which is an increase from the previous year’s $70.59 million.

According to the bicycle exporters’ estimation, Chinese bicycles could cost significantly lower (about 10% to 20%) than the Bangladeshi cycles in the European markets and they could also cater with a much shorter lead time. This is due to a number of factors, one being a high cost of production as the majority of the raw materials of the bicycles are imported from various countries. 

The import duties of the raw materials range from 10% to 25% which leads to a higher price for the consumers. The duty of spare parts is even higher, parts such as brakes, gears, chains have an average duty of 55%, there are a few items being made locally such as the bicycle frame, tyre, rim and spoke. 

This high cost of production is reflecting on the number of sales as the manufacturers are having a difficult time competing with foreign competitors in the domestic market. Currently, the Bangladeshi domestic market is dominated by India and China, with 70% of the bicycles being imported to meet the local demand.

Even though the local manufacturers are doing well in exports, they have a long way to go in the domestic scene, for which a number of measures can be taken into consideration. 

A reduction of import tariffs while maintaining minimum quality standards for the domestic market can help reduce the gap between the domestic and export markets. The congestion in the ports and delay in the delivery of imported parts also causes the bicycles to become costlier and less competitive, which suggests that more investments are required in the backward linkage industries in the light-engineering sectors. 

If Bangladeshi manufacturers can overcome these obstacles, the export market will not only be limited to a few countries. The Asian market is growing at a very steady rate, which can be a definite potential market for the local manufacturers.

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