Bangladesh Automobile Industry: Current Trends and Future

Bangladesh Automobile Industry

Automobile industry is one of the growing sectors in Bangladesh. Compared to the last decade, the growth of the automobile industry has gradually increased due to the socio-economic development and purchasing power of the middle and upper middle class of the country. According to BRTA data, the number of passenger car vehicles increased at a 5.43% CAGR rate from 2011-2020. However, compared to other Asian countries, the passenger car penetration is still very low in Bangladesh. There are only 2.5 car owners per 1000 population. In India, 30 people among 1000 individuals owned a car at the end of 2018. In Myanmar, about 12 people out of 1000 own a car. Higher tax rate on automobiles, inadequate and narrow national highways, high traffic density, high price of fuels, higher interest rate on private vehicle financing are responsible for the lower number of car owners in Bangladesh. Due to the covid-19 pandemic, sales of automobiles declined to its lowest in 7 years. In this article, we will discuss current trends and the future of Bangladesh’s automobile industry.

Overview of Industry

The use of motorized vehicles has increased significantly in the last 2 decades (2000-2020). According to The Daily Star, There were only 303,215 units of registered motorized vehicles in 2003 in Bangladesh. But up to MAY 2021, According to BRTA data, there were 4,729,393 units of registered vehicles in Bangladesh. Among them, 544,616 are passenger cars. The automobile market is again dominated by sedan cars, covering almost 68% of that passenger car market. The Remaining 12.40% are covered by Sports utility vehicles (SUVs) and 19.27% are covered by microbus. Due to the increase in purchasing power, mass people are buying vehicles more than ever before.

The purchase rate of cars increased dramatically till 2017. In that year, the number of total private passenger cars, jeep and microbus registered by BRTA reached 32,942. But the purchase of personal vehicles decreased in the next couple of years. In 2020, the number decreased to 20,093. Slower economic activity, adjustments in the financial market, higher tax rates, the popularity of ride-sharing companies can be the reasons for the fall. The covid-19 pandemic also hits the market to the worst. But it is expected that the automobile market will be back on track after the pandemic effect ends and the economy gets stable. According to The Daily Star, around 1 crore 20 lakh middle-class people of Bangladesh are earning enough to own a car and are willing to have one. This population class has a growth rate of 10% per year as well.

Although cars are not yet manufactured in Bangladesh, many companies, both public and private, have been assembling cars. The first automobile assembly operation was started in 1966, by ‘Pragati Industries Limited’. They were operating through a joint venture with the government. After independence, the government of Bangladesh nationalized ‘Pragati Industries Limited’. This plant basically assembles Mitsubishi brand’s SUVs for the government officials. The Bangladesh government is also planning to manufacture local branded cars here in ‘MUJIB BORSHO’ with the help of Japanese Mitsubishi company. Apart from that, some local private automobile assembling companies are operating in Bangladesh including IFAD Autos Ltd, Aftab Automobiles, Fair Technology Limited, Bangladesh Auto Industries Limited, Bangladesh Machine Tools Factory, Bangla Cars, Niloy-Hero Motors, PHP Automobiles, Pragoti Industries Limited, Runner Automobiles and Uttara Motors Limited. But locally assembled cars haven’t gained much attraction in the market so far. In 2020, among the new registered cars, 82% are reconditioned or grey market imported, 16% are brand new imported, and only 2% are locally assembled vehicles. Let’s see some trends of the Bangladeshi automobile market in recent years.

Current Trends In Market

Increasing Demand for Brand New Cars

The Japanese reconditioned cars are dominating the automobile market of Bangladesh for a long time. But, currently the demand for Japanese reconditioned cars is slowly declining. In 2016, reconditioned cars almost covered 92% of the demand, and in 2020, it decreased to 82% of the automobile industry in Bangladesh. The tax difference between reconditioned Japanese cars and brand new cars became minimal. Currently, ‘NBR’ imposed tax on reconditioned vehicles based on their base value, not on their depreciated 2nd hand value, that made the car more expensive than the actual price. On the other hand, brand new cars are taxed based on the importer’s actual cost. So, the price difference between reconditioned cars and brand new cars becomes minimal and people are becoming more interested in purchasing brand new cars. Although the ‘Japanese Domestic Market (JDM)’ car is made only for use in Japan, the reconditioned ‘JDM’ is imported to Bangladesh. Peoples of Bangladesh prefer to buy Japanese durable cars. These cars have some features which are of no use for Bangladeshi users. Besides that, these cars come with outdated features, whereas brand new cars come with plenty of new features.

An online survey of Lightcastle shows that, 50% buyers consider ‘unique features and specification’ and 44% of buyers consider ‘brand value’ and 34% of buyers consider ‘availability of parts and service’ of a car before purchasing. But the latest features are not available in reconditioned cars.

Authorized importers and dealers are now ensuring the availability of authentic parts for brand new and luxury cars. That’s why a shift in the automobile industry has been already observed in recent years. In 2016, brand new cars covered 7% of the total market. After 4 years, in 2020, the market share doubled and covered 16% of the total market. Importers are importing new cars from various brands of China, Germany, India, Malaysia, South Korea, Thailand, UK and US. It is expected that the brand new car’s market share will increase to 20%-60% by 2025.

Sports Utility Vehicle (SUV) Obtaining Popularity

SUVs or JEEPs are primitive segments of vehicles and were always present in the Bangladeshi market. But their use was limited within the government officials and important corporate personnels. In recent years, following the global trend, SUVs are becoming popular among family buyers too. SUVs provide better driving comfort in Bangladeshi road conditions as well as high ground clearances. The sportier look of SUV’s attracts the younger generation as well. Following the increasing demand, all brands are focusing on the ‘SUV segment’ and brands that did not produce ‘SUV’ before are also bringing SUVs to market. For example, Lamborghini launched an SUV model called ‘Urus’ and Toyota launched an SUV called ‘cross’ under their most popular ‘Corolla’ series. Realizing the demand for hybrid cars, the dealers have also brought these models in Bangladesh. Some Chinese brands like DFSK, MG, HAVAL are bringing affordable SUVs to Bangladesh. According to a survey of Lightcastle, 28.1% of the prospective buyers are willing to buy a SUV in the future. In 2017, only 16% of the market shares were dominated by SUVs which was increased to 24% by 2020.

Increasing Demand for Hybrid Vehicles

Hybrid vehicles in the Bangladeshi market are growing at a significant rate. Toyota Axio, Honda Grace, Nissan X-trail are some of the popular hybrid vehicle brands in Bangladesh. Due to lower tax rates on Hybrid vehicles compared to gasoline fueled vehicles, they are gaining popularity among the buyers. All car brands are planning to bring EV cars in future. Following the plan, they are producing hybrid versions of their existing models. For example, Toyota has introduced a hybrid version of their most popular SUV ‘Land Cruiser 2021’ model. In 2018, the hybrid four wheeler market achieved a 900% increase in sales. According to a leading importer and retailer of the Bangladesh automobile industry, a basic 1500 cc car can run 7-10 KM/liter, while a hybrid car with the same cc can run almost 15-25 KM/liter. In addition to engines, Hybrid cars have motors which provide extra BHP for the car. So that, compared to gasoline versions of the similar cc cars, hybrid models provide extra power. As a result, hybrid cars can enjoy lower cc import duty rates, but provide power similar to higher cc cars. For example, in Bangladesh, the hybrid version of the Range Rover is available at a much lower cost than the fuel version. 

People were reluctant to buy hybrid cars in the past due to lack of knowledge, unavailability of parts and expert technicians. But now, affordable prices, authorised dealers, and service centers helped gaining confidence among potential buyers slowly to buy a hybrid vehicle.

Following the hybrid vehicles, Electric Vehicles are also entering the country. Some Teslas and ‘Porsche Taycan’ have already been imported in Bangladesh. Tax rates of EV is so far, very low in Bangladesh. Gasoline fueled CBU vehicles have import duty on 128% to 827%. Whereas, The Total Tax Incidence (TTI) of electric vehicles is 59% which is almost half of the lowest taxed imported gasoline fueled vehicles. But again, lack of charging facility on roads, technical expertise and road condition of Bangladesh are constraints of EV becoming popular in the market.

Future of Bangladesh’s Automobile Industry

Foreign investment in the local automobile industry has been stagnant due to the heavy duty structure on imported vehicles. But the new automobile industry development policy 2020, published by the Ministry of Industries, opens a scope for local and foreign investors to set up local assembly plants. The policy provides fiscal incentives for building assembly plants as well as tax reduction for importing semi knocked down (SKD) and completely knocked down (CKD) parts to facilitate the local assembly.

According to Lightcastle’s research, local and foreign companies will not go for ‘full manufacturing’ in the automobile industry. Because, full manufacturing will only be viable when the local demand of the total automotive industry including passenger vehicles, commercial vehicles and pick up or transport trucks will reach to 1 lakh units. That’s why the majority of automobile investments will go towards assembly plants for SKD and basic CKD assembly of vehicles by 2025. According to the research, local assembly of vehicles can reduce the overall price of the automobile industry to 15%-40% by 2025. If the price reduction is achieved, a vast population from the middle to lower-middle class segment will buy family and personal cars. Analysis also shows that the annual sales of personal cars will be doubled and 60% of that sales will be covered by brand new vehicles by 2025. To encompass the opportunity, Several companies have already set up assembly plants and some are planning to do so. The first private sector owned assembly plant was established in 2015 by PHP group. They are assembling Malaysia’s ‘PROTON’ branded cars in Bangladesh. Sufi Mohammed Mizanur Rahman, chairman of Proton automobiles, said that they are currently manufacturing Proton saga 2021 version in their plant. Fair technologies Limited is assembling ‘Hyundai’ sedans, SUVs and MVPs in their plant located in Kaliakoir, Gazipur.

The government of Bangladesh also has a target of having at least 15% of all registered vehicles be run by “environment friendly electricity” by 2030. Thus, Local companies are not lagging behind on Electric Vehicle (EV) manufacturing as well. Bangladesh Auto Industries Ltd (BAIL) is building a Battery Electric Vehicle (BEV) plant in Bangabandhu Industrial Park. According to Mr. Mir Masud Kabir, the MD of the company, has a plan to invest 1 billion dollars within the next five years. But covid-19 have slowed down their plans, as they couldn’t receive shipments in time. The company expects to provide SUVs at around BDT 25 lakh, sedans at around BDT 12 – 15 lakh and Hatchbacks at BDT 8 lakh or less. Future will prove whether they can keep their promise or not. Nitol Motors has an ‘under construction’ EV plant in Ishwardi, Pabna. The 350 crore worth of plants are now waiting for the machinery to install and start the production with the capacity of producing 20,000 EV annually. Abdul Matlub Ahmad, chairman of Nitol-Niloy group, said that they have designed a 25 kWh battery powered electric sedan, which will cost not more than BDT 10-12 Lakh, and might be available in the market within 2024.

Rangs Limited is planning to assemble Mitsubishi branded vehicles and Uttara Motors Limited are also planning to assemble Suzuki branded sedans, SUVs and MPVs in locally established plants.


Some steps can be taken for the development of the automobile industry in Bangladesh.

  1. In order to achieve sustainable growth in the automobile market, the government can reduce the import duty on vehicles. The current duty rate of 128%-827% is too high for manufacturers and can be revised. According to the suggestion of Runner group’s Chairman Hafizur Rahman Khan, National Board of Revenue (NBR), Bangladesh Investment Development Authority (BIDA) and Ministry of Industry should synchronize their operations and come up with long term policies for sustainable development of the local automobile industry. Frequent policy changes discourage foreign investments in local assembly plants.
  1. According to Lightcastle’s survey, 28% of buyers will purchase their car from bank loans. But due to high bank interest, many people become reluctant to buy a car. During the pandemic, banks are having excess liquid money and are trying to disburse loans at the lowest rates, about an average of 7%-9%. If the Bangladesh government gives loans at low interest rates, the number of car buyers will increase and the automobile industry will grow faster.
  1. As the future of automobiles will be dominated by the EV industry, Bangladesh can start preparing now from scratch and needs small and incremental innovations in the EV sector. Government can provide a high voltage electric grid across the country for charging EVs. Government is already paying a penalty on the power sector for being unable to buy surplus electricity. The government is obliged to buy additional electricity from the power plant on the basis of the contract. In the 2018-19 fiscal year, the amount of this ‘capacity payment‘ was 9000 crore. If the government would provide such an amount of money as a subsidy to develop the EV sector, then the surplus electricity would have been used for charging EVs. As a result, the penalty expenditure on power plants would have been saved. At the same time, the number of electric vehicles in the country could be increased.
  2. Local assembly plants can focus and invest more on the quality of the product. In Bangladesh, Japanese cars are popular, because Japanese cars provide durability and reliability for years. A competitive culture on quality should be developed within local companies aimed to produce durable and high quality vehicles.
  1. China is shifting to a heavy equipment and tech based industry from the auto parts industry. They are dumping the manufacturing of auto parts industry to less developed Asian and African countries. Bangladesh has competitive advantage on low cost labors, mid level manufacturing expertise and tax incentive facilities which creates a suitable environment for the auto parts manufacturing and export industry. The government can implement a perfect strategy and facilitate the automobile parts industry to flourish in Bangladesh.


Although the automobile industry of Bangladesh is more developed than before, so far it has not achieved the expected success. Considering hybrid and electric cars, import duty policies will bring sustainable growth in the future. Along with the growing GDP of Bangladesh, people’s buying power is increasing gradually. Similarly, people’s lifestyles are changing as well. So, the usage of personal cars will raise for sure. We are still not capable of manufacturing cars in Bangladesh. Our neighboring country India is already capable of manufacturing cars. India’s local companies like ‘Tata’ and ‘Mahindra’ are satisfying significant local demands. If the government emphasizes the automobile assembly and manufacturing sector, one day we might see “Made in Bangladesh” cars fulfilling the local demand of this country.

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