Recent decline in passenger vehicle sales contrasts with rising economic growth

Despite its growing affluent middle-class population and increasing purchasing power of the
general mass, Bangladesh’s automobile industry has remained somewhat of an anomaly. The
size of the country’s automobile industry, in particular the passenger vehicle segment, remains
modest compared to other Asian peers, with only 2.5 cars per 1,000 population. The market has
grown multifold over the years and has become an industry worth USD 1 billion (BDT 84,969
million) [1]. Passenger vehicle sales are dominated by the sales of imported reconditioned cars,
which contribute a significant percentage of import duties for the Bangladeshi government.

According to Bangladesh Road Transport Authority (BRTA), 377,660 vehicles were registered
in Bangladesh in 2020 and only 20,093 of them belonged to the passenger vehicle segment,
covering merely 5.3% of the automobile industry volume, while 82% of the automobile industry
volume was dominated by motorcycles. Passenger vehicles include sedans or private cars, sport
utility vehicles (SUV) or jeep and microbus or multi-purpose vehicles (MPV). Within the
passenger vehicle segment, sedans (also referred to as private cars) accounted for almost 55%
with 12,403 units registered in 2020. The remainder of the passenger vehicles segment was
captured by SUVs and microbuses with 4,911 units and 2,779 units respectively[2]. These
numbers have also changed over the last few years, where SUVs and MPVs have mostly
recorded a gradual increase in demand, while the registration of sedans have at times been
stagnant or even decreased.

The automobile market in Bangladesh has seen a significant growth in the last decade, especially
between 2015 and 2017. At the peak of its trajectory, BRTA had reported 32,942 registered
passenger vehicles in 2017 that has since been on the decline. Between 2018 and 2020, the
number of registered passenger vehicles has declined by almost 39% [2].
 Figure
2: Vehicles Per 1,000 Population / Source: Policy Research Institute (PRI) of Bangladesh[1]

Covid hits the industry at its lowest point in 7 years

2020 marked the advent of the Covid-19 pandemic and the ensuing spells of country-wide
lockdown have adversely affected the sector at a precarious time. BRTA has reported a 21% fall
in the number of registered passenger vehicles in 2020. In fact, 2020 marked the lowest number
of annual vehicle registration since 2013[2]. It is expected that the decline will be prolonged until
at least 2021, as the effect of government moratorium on vehicle purchases announced in July
2020 takes hold. The fulfilment cycle for government vehicle orders can be as long as 1 year and
although there had not been a major dip in government procurement in 2020 as companies
fulfilled orders from 2019, the full effect of the 2020 moratorium will be truly felt in 2021. Many
dealers and brands make a substantial share of their annual sales from government purchases for
large-scale projects or courtesy of various special loan facilities extended by the government to
high-level government officials and defense personnel. In light of the second wave of Covid-19
in the second quarter of 2021, assemblers and importers remain wary of a glut in the market until
the effects of Covid-19 fully dissipate.
 Fi
gure 3: Number of Registered Motor Vehicle in Bangladesh / Source: BRTA Data[2]

Consumer preference for brand new cars over reconditioned cars increases gradually

Historically, the Bangladeshi car industry has been heavily dependent on reconditioned cars. In
2020, imported reconditioned cars accounted for 82% of all passenger vehicle sales[4]. Japanese
imports, in particular, are highly valued by customers over any other cars. Even though there are
options from China, Germany, India, Malaysia, South Korea, Thailand, UK and USA, the brand
reputation and recognition of Japanese cars make them the most desired in the reconditioned
market. However, industry insiders have noticed a perceptible shift in customer mindset. Interest
in brand new cars has risen exponentially in recent years driven by young purchasers and
purchase influencers. Although imported brand new cars accounted for only 10% of volume in
2018 and contributed 27% to the total import value of all passenger vehicles (including
reconditioned imports of sedans and microbuses) in FY 2018-19[1], by 2020 their market share by
volume had risen to 16%[2]. LightCastle interviews also confirm this trend, with interview data
showing 78% of brand new car dealers recorded higher sales in 2020 than the year before. This
suggests that reconditioned sellers have borne the brunt of the decline in sales from Covid-19.
The share of locally assembled vehicles had somewhat at around the 2% mark between 2018 and
2020.
 Figur
e 4: Split of New, Locally Assembled and Reconditioned Vehicles / Source: Bangladesh
Customs Data [4]

Tax differential is creating a conducive environment for the brand new car market

Reduced price difference between brand new and reconditioned cars due to the differential
import duty structure is one of the prominent reasons for this shift in preference towards brand
new cars. Reconditioned car prices imported from Japan are calculated based on their Yellow
Book price set by Japan Auto Appraisal Authority. But the National Board of Revenue (NBR)
imposes tax on the base value instead of the depreciated value, which values the car at
substantially more than it is worth. In contrast, brand new cars are taxed based on their importer-
declared value.
Table 1: Import Stage Tariff Rate for CBU Cars / Source: Policy Research Institute (PRI) of
Bangladesh [1]

Table 2: Import Stage Tariff Rate for CKD Cars / Source: Policy Research Institute (PRI) of
Bangladesh [1]
However, the popularity of reconditioned cars remain strong, and entrenched players believe the
reconditioned segment to remain competitive and relevant as long as they can offer a varied
range of options to the customers and the duty percentage does not increase further.

Growing demand for SUVs eating into share of sedans

SUVs have always been available in Bangladeshi market, but their sales have been heavily
overshadowed by sedans. But most brands are now bringing in more of their SUV models into
Bangladeshi market as demand continues to rise in line with a globally-evident trend.
Interviewees point out the desire for sporty look by the younger generation of customers, the
higher ground clearance and ease of driving in Bangladeshi road conditions, and increased
availability of affordable options as some of the rationales driving this shift in customer
preference. SUVs in 2020 held a 24% of the market share among all passenger vehicles, growing
from 16% just three years ago in 2017 [2].

Hybrid vehicles are gaining traction, paving the way for electric vehicles

Along with SUVs, roads in Bangladesh are now seeing a growing number of hybrid cars and
importer-dealers believe that their continued growth in the next five to ten years may replace
much of the fossil fuel vehicles. Fear of technical difficulties, perceived challenges in
maintenance, scarce after sales service and the lack of trained technicians in regular service
stations contributed towards customer hesitation in adopting hybrid cars in Bangladesh. But with
time, acceptance has increased due to a lower tax rate making it a much more affordable option
for the customers compared to fossil fuel vehicles. Consumers are beginning to understand that
hybrid vehicles can offer them the best of both electric power and fossil fuel worlds.  Industry
professionals note that most importers are now bringing in hybrid models, both in reconditioned
and brand-new markets, while both individuals and companies are leaning more towards hybrid
cars for cost savings and ease of maintenance.

Following the lead of hybrid cars, electric vehicles (EV) are also entering the Bangladeshi
market. Electric motor cars already have the lowest TTI among all imported vehicle categories at
59%, which is less than half that of the lowest TTI for imported CBU fossil fuel cars[1]. Although
EVs are yet to reach the early adoption phase, professionals see a potential for massive growth in
five to ten years’ time. However, the majority of respondents expressed concern about whether
Bangladesh is ready to embrace EV technology yet. Unavailability of charging facilities on
roads, inadequate power supply, unavailability of spare parts, lack of technicians to match the
sophistication of the technology, and poor quality of roads are some of the road bumps ahead in
the adoption of EVs.

These demand-side trends are expected to shape the future of the automobile industry going
forward. However, even larger tectonic shifts are expected from the supply-side as well, since
the government has signaled its ambitions through the drafting of the Automobile Industry
Development Policy, which aims to turn the country into an automobile production hub, and
eventually an export powerhouse. The next article in this series will discuss the essence of the
automobile policy while emphasizing on the strengths, critiques, and recommendations for
improvement of the policy.

Four-Wheeler Hybrid: Due to lower operational costs, the demand for hybrid vehicles has gone
up over the last few years. In terms of sales, the figure had been rising sharply up until the
COVID-19 pandemic in 2020. In 2018, the hybrid four-wheeler market has registered a 900%
increase in sales.
Four-Wheeler EV: The four-wheeler EV market is still virtually non-existent in Bangladesh.
Currently, it is estimated that there are less than 10 passenger EVs in the country, and all of them
are concentrated in the capital city. However, the market is likely to pick up in the future as the
country is expecting to receive sizeable investments in the sector. Nitol-Niloy’s ‘Suvare’ was set
to be the first locally assembled four-wheeler EV to hit the market before being interrupted by
the pandemic. The project with an estimated cost of BDT 3.5 billion, is being set up in Pabna and
Bogura.[3] Moreover, Bangladesh Auto Industries Ltd. (BDAuto) has invested $200 million in the
country to locally manufacture electric SUVs, sedans, hatchbacks, two-wheelers, and three-
wheelers.[4]

Three-Wheeler EV: Although the four-wheeler EV market has not yet flourished in the country,
EVs dominate the three-wheeler market in Bangladesh with motorized rickshaws and easy-bikes.
The total number of easy bikes and motorized rickshaws are 1 million and 240,000 respectively,
which facilitates transportation for 250 million people in the country.[5] Considering the socio-
economic context of the country, these vehicles are an ideal mode of transportation due to their
inexpensive nature. Moreover, sharing rides is one of the distinctive features that make this
transport more popular as it reduces per head fare cost. The popularity of three-wheelers in
Bangladesh has been able to attract foreign and domestic investments. India’s automaker Omega
Seiki has recently announced an investment of INR 1 billion to set up EV manufacturing
facilities in Bangladesh. [6] Moreover, local auto manufacturer BDAuto is also set to manufacture
three-wheeler EVs for domestic and foreign markets.

Two-Wheeler EV: Like three and four-wheelers, electric motorbikes are also drawing the
attention of Bangladeshi consumers due to lower fuel costs and convenience. Recently, local
giant Walton has announced the introduction of their e-bike lineup. As claimed by the
manufacturer, the vehicles will be highly cost-efficient as the operating cost per kilometer will
range between only 10-15 paisa. Moreover, the bikes are expected to be priced lower than
traditional two-wheelers. It will cost only 7-8 Taka to fully charge the vehicles.[7] Apart from
Walton, some other local manufacturers such as Runner, Akij, and Duranta are planning to
distribute locally assembled two-wheeler EVs in the Bangladeshi market. 

Look at this list of cars that are dominating the Bangladesh car market by brand:
 Brand Share
Toyota 80%
Honda 7%
Nissan 6%
Others 7%

We have also made a list of top Toyota cars as they dominate the market:

Toyota Model Share

Premio 14%
Axio 11%
Allion 10%
Corolla 10%
Noah 8%
Others 47%
Why Toyota’s share is 80%?
In Bangladesh, most of the Toyota cars are bought Reconditioned or used. All the spare parts are
available and cost-efficient. The Toyota cars have stylish looks all the features with enough
engine power and it has a good resale value. That is why these many Toyota cars are seen so
frequently in Bangladesh.

Among the different types of motorized vehicles, motorcycles cover the lion share, almost
80 percent of the total amount, followed by private passenger cars covering 5 percent. The
number of motorcycles increased swiftly owing to its cost-effectiveness backed by high traffic
congestion in the cities.
FIGURE: Share of registered motorized vehicles in Bangladesh / Source: Bangladesh Road
Transport Authority
Most of the automotive parts including engine, alternator, radiator, brake pads, tire, suspension,
body components, etc. are also imported from Thailand, China, Taiwan, Indonesia, Dubai and
India. Almost 200 auto parts traders operate in the country with a few local manufacturers
among which Pragoti Industries Ltd is the largest.[2] The locally manufactured parts fail to
ensure high quality in comparison to the imported ones. Hence, traders have to rely on imported
parts.

Car Market Dominated by Japanese Brands 

Reconditioned cars have been predominantly ruling over the car market while 95 percent
of the cars are imported from Japan.[3] The reconditioned car market in Bangladesh is
typically considered as new cars in the local market which covers 50 percent of the total car
market. While 5 percent of the cars are brand new, the rest 45 percent are used cars referring to
the presence of a healthy second-hand car market.[4]

FIGURE: Conditions of cars in the market / Source: Bikroy.com

While multiple car assemblers and distributors have emerged in the country, Toyota and Hino
vehicles are distributed by Navana Ltd. Besides, Rangs Ltd, Uttara Motors Ltd and Nitol-Niloy
Group remain the sole distributors of Mitsubishi Motors, Suzuki vehicles and Tata vehicles
respectively.

Among the private passenger cars, the Japanese brand Toyota has been dominating the market
since the 1990s. Other popular brands include Honda, Nissan, Suzuki, BMW, and so
on. According to the vehicle advertisement data of Bikroy.com in 2018, Toyota shares 80%
of the market popularity.[4]  
FIGURE: Popularity of the car brands / Source: Bikroy.com

The most selling cars in Bangladesh include different models of Toyota including Corolla, Noah,
Allion and so on. The model Toyota Corolla is undoubtedly the most popular due to its high
cost-effectiveness. Toyota Noah is the most popular choice as a family car while Mitsubishi
Pajero leads among the SUVs. 

In Bangladesh, there are few large car plants which assemble the Mitsubishi Pajero Sport, Hino
bus, Tata bus & motorcycles etc. (Wikipedia, 2017). Some top automobile assembling &
manufacturing companies are Uttara Motors Ltd, Nitol Motors Ltd., S.R Motors Ltd., Akij
Motors, Pragoti, Bangladesh Machine Tools Factory, Aftab Automobiles, TVS Auto Bangladesh
Limited, HS Enterprise, TATA Motors Bangladesh (Joint Venture with Nitol- Niloy Motors
Ltd), Atlas Bangladesh Ltd., Walton Hi-Tech Industries Limited, Runner Automobiles, Singer
Bangladesh Limited, Bangladesh Honda Private Limited, Rangs Motor's Ltd., Rahimafrooz
 Globatt Limited, Chisti Engineering & Mechanical Works, Jonata Auto Mobile Parts, Ifad Autos
Ltd . Some Automobile products in Bangladesh & their Brand name are given below

Products Brand Name

Heavy Bus Hino, Isuzu, Volvo, Scania, Hyundai, Tata,
Mercedes Benz, Man etc.
Mini Bus Hino, Mitsubishi, Isuzu, Toyota, Sawraj
Mazda, Tata, Eicher etc.
Microbus Nissan, Mitsubishi, Toyota etc.
Heavy Truck Hino, Tata, Bed Ford, Isuzu, Ashok Leyland
Mini Truck Hino, Tata, Mitsubishi, Isuzu, Toyota, Eicher,
Sawraj, Mazda etc.
Motor Car Toyota, Mercedes-Benz, Nissan, Mitsubishi,
Ford, Daewoo, Proton Saga, Proton Wira,
Hyundai, BMW, Maruti Suzuki etc.
Four Wheels Toyota, Tata, Mitsubishi, Nissan etc.
Auto Tempo Bajaj, Krishan
Scooter Bajaj, Krishan
Motor-cycle Honda, Xingfu, Jialing, Zongshen, Yamaha,
Suzuki, Hero, TVS Victor, Bajaj, Vespa etc.
Light & Heavy Commercial Vehicles Nissan, Daewoo, Hyundai, Volvo, Ashok
Leyland, Tata, Hino, Mitsubishi etc.
Farm & Agricultural Vehicles Hyundai, Daewoo, Dongfang, Dong- chang
etc.

Year wise Number of Registered Motor Vehicles in Bangladesh

Sl. Type of Upto-2010 2011 2012 2013 2014 2015 2016 2017/ Gran
No Vehicles Feb d
Total
1 Ambulan 2793 219 181 243 338 480 378 66 4698
 ce
2 Auto 126763 2042 2354 1569 1989 2000 1117 1182 2386
Ricksha 3 5 7 7 0 3 80
w
3 Auto 14266 175 626 395 500 1095 1322 119 1849
Tempo 8
4 Bus 27778 1761 1439 1107 1488 2391 3833 818 4061
5
5 Cargo 3522 489 282 687 608 399 1017 158 7162
Van
6 Covered 5658 2354 1421 2271 2869 2354 3340 690 2095
Van 7
7 Delivery 17063 1004 774 894 1176 1719 2181 366 2517
Van 7
8 Human 6520 1152 715 385 225 1142 3487 810 1443
Hauler 6
9 Jeep(Har 32286 2134 1569 1314 1870 3601 4892 729 4839
d/Soft) 5
10 Microbu 66379 4051 3044 2537 4313 5224 5804 939 9229
s 1
11 Minibus 25644 276 249 148 256 323 472 89 2745
7
12 Motor 759257 1146 1015 8580 9068 2403 3320 53675 1778
Cycle 16 88 8 5 58 57 044
13 Pick Up 32240 1046 7625 6553 9554 1025 1137 1906 8996
(Double/ 0 7 1 6
Single
Cabin)
14 Private 219830 1295 9224 1047 1469 2106 2030 3942 3124
Passenge 0 2 9 2 4 83
r Car
15 Special 6371 396 226 227 172 296 620 215 8523
Purpose
Vehicle
16 Tanker 2706 317 195 226 362 324 394 68 4592
17 Taxicab 44380 75 172 51 374 88 44 2 4518
6
18 Tractor 20600 5200 3494 1885 1522 1699 2576 449 3742
5
19 Truck 82871 7327 4335 5129 8136 6330 7275 1920 1233
23
20 Others 1317 7 1 1080 1595 2073 3870 1055 1099
8
Total 1498244 1853 1607 137 1606 321 4164 69198 294890
86 05 109 39 215 10 6
Source: Bangladesh Road Transport Authority

Year-wise Number of Registered Motor Vehicles in Dhaka

Sl Type of Upto- 2011 2012 2013 2014 2015 2016 2017/ Gran
. Vehicles 2010 Feb d
N Total
o
1 Ambulance 1374 137 114 190 254 358 287 49 2763
2 Auto 7664 112 111 60 56 428 582 8 9021
Rickshaw
3 Auto Tempo 1662 1 1 0 0 0 0 0 1664
4 Bus 16783 1501 1218 971 1364 2221 3479 727 28264
5 Cargo Van 3231 477 278 676 603 398 1001 155 6819
6 Covered Van 4277 1910 1170 1850 2352 1855 2316 554 16284
7 Delivery Van 11990 839 577 709 901 1464 1898 329 18707
8 Human 2718 569 145 115 109 502 787 74 5019
Hauler
9 Jeep(Hard/ 19520 1698 1241 1107 1582 3109 4217 593 33067
Soft)
10 Microbus 46202 3540 2643 2227 3842 4569 5169 800 68992
11 Minibus 9490 136 103 83 135 103 164 25 10239
12 Motor Cycle 21008 3470 3281 2633 3289 4676 5373 10079 44740
1 8 0 1 4 4 8 5
13 Pick Up 20481 7258 5149 4908 7295 7916 8482 1394 62883
(Double/Sing
le Cabin)
14 Private 16300 1142 8187 9231 1297 1842 1801 3417 24466
Passenger 4 3 2 2 0 6
Car
15 Special 759 60 28 78 50 66 224 49 1314
Purpose
Vehicle
16 Tanker 817 152 90 136 163 146 209 46 1759
17 Taxicab 36011 52 43 4 302 54 30 1 36497
18 Tractor 9923 4169 2841 1634 1443 1637 2510 445 24602
19 Truck 26922 4205 2824 3522 5767 4424 4553 1120 53337
20 Others 168 0 0 660 967 1307 2567 687 6356
Total 593077 7294 5957 5449 7305 9574 110223 20552 107965
7 3 2 1 3 8