The motorcycle market is ripe with opportunities
The motorcycle market is poised for rapid growth. The industry predicts that by the end of 2019, there will be 6 lakh units. This has been made possible due to price cuts stemming from when the government slashed the supplementary duty by 25 percentage points to 20 percent on the import of the two-wheeler’s components in fiscal 2016-2017. As more incentive, the duty on import of completely knocked down units of motorcycles was slashed by 25 percentage points to 20 percent in 2016-17 to encourage local assembly and subsequent manufacturing. Local manufacturing by most of the brands has afforded the industry the optimism to predict the 6 lakh unit forecast. As a result of the reduction, prices of bikes fell, encouraging the bike enthusiasts to go out and purchase one for themselves.
Apart from price cuts, the increasing purchasing capacity and the demand for faster mobility has lent itself to the industries thriving success. Although the precise sales data are not available, it is estimated that about 4.80 lakh units of bikes were sold in 2018, posting 24 percent year-on-year growth with the highest growth taking place in the 150cc segment, followed by the 110cc segment. The market is gearing up for a 30 percent growth in 2019.
The government also framed the National Motorcycle Industry Development Policy 2018 with a view to diversifying the country’s manufacturing and exports and creating jobs. The government is looking to increase the motorcycle sector’s contribution to the GDP from the current 0.5 percent to 2.5 percent. The policy also encourages the expansion of the industry’s capacity, now dominated by assembling of imported components. The draft policy aims to locally manufacture 5 lakh motorcycles a year by 2021 with an ambitious goal to double that by 2027.
Alongside the vision to achieve the capacity for meeting the domestic requirement by 2027, the policy also aims to develop a modern and competitive vendor industry where components will be manufactured which will prove helpful for the motorcycle industry. Policies supporting the manufacturing ecosystem domestically would not only help create more jobs for the Bangladeshi people through automobile sector but can also help produce more affordable and qualitative motorcycles. More than half a dozen firms are establishing facilities to assemble and manufacture two-wheelers. Every day new buyers are visiting the sales centers in their quest for faster mobility, be that in traffic congested big cities, small towns or in rural areas.
It is not just the price cuts, the increased demand that proliferated the industry’s growth. With the demand for faster mobility came the burgeoning of ride-sharing apps which in turn fueled the recent increase in bike sales. The government rolled out the policy Ride-sharing Service Guidelines 2017 which came in effect on 8 March 2018 validating the operations of app-based transport services like Uber and Pathao. Under the guideline, ridesharing service companies will have to collect “Ride-sharing Services Company Enlistment Certificate” while the motor vehicle owners have to collect “Ride-sharing Motor Vehicle Enlistment Certificate” to regulate app-based transport services with cars, motorcycles, and ambulances. Any company which seeks the BRTA permission must have at least 100 vehicles in its fleet for operating in Dhaka, 50 for Chittagong and 20 for other cities. With the ride-sharing industry catalyzing the surge in the motorcycle industry, this policy is an effort to streamline the growth of both industries. Furthermore, these app-based mobility solutions are enticing the youth to earn some quick and reasonable cash out of commuting through the sharing of resource.
Operators have predicted that the market will grow exponentially in the next two to three years thanks to rising incomes, the steady growth of the economy and favorable policy and tariff structure that encourages assembling, leading to manufacturing. We can expect a gradual end of the import of completely built bikes into the country.
Even though the growth is promising, it is relatively a new one. Currently, only around 19 percent of households in Bangladesh have motorcycles. Comparing with neighboring countries like Pakistan, India, China, Pakistan, Malaysia, and Thailand, where the numbers of households owning two-wheelers are 43 percent, 47 percent, 60 percent, 83 percent, and 87 percent respectively – the motorcycle market in Bangladesh still has some catching up to do with the markets in the region. With his expert views on the potentials of the motorcycle market in Bangladesh, J Ekram Hussain, Managing Director, TVS Auto Ltd shares his insights.