Automobile

Bangladesh Automobile Industry

Overview

Bangladesh is one of the most promising markets for the expansion of four-wheeled automobiles. The number of annual registered automobiles has more than doubled since 2013, amounting to about 26,000 units for passenger vehicles and 37,000 units for commercial ones (excluding auto-rickshaw, human hauler) in 2019.

Although commercial vehicles are dominant, the growing purchasing power of middle-income population has spurred passenger vehicle registration. Due to steadily increasing per capita income as well increasing economic activity, the demand for both passenger and commercial vehicles is expected to grow at a rapid pace.

Automobile Policy 2020-Encourages local automobile assembly manufacturing

Annual market demand expected to cross 100,000 vehicles by 2024

SUV and Hybrid vehicles are the fastest growing segments

One of the sunrise industries, the four wheeled automobile industry is attracting investments with the recent entrance of several global brands. Bangladesh's automobile ecosystem offers huge opportunities for investments with stimulating growth in the demand for passenger and commercial vehicles, favorable economic policies, and attractive fiscal incentives.

Advantages of Bangladesh

Growth drivers

The demand for four wheeled vehicles is expected to continue growing rapidly in Bangladesh.

Low penetration ratio of 6 per 1,000 population indicates potential for further growth.
Growing middle-income population: Sustained economic growth over the last decade has enhanced consumers’ purchasing power and affordability, leading to the rise in demand for consumer durables. According to the Boston Consulting Group, 30 to 40 million people will join entry-level middle-income class by 2025, while another 34 million will move to a higher middle-income bracket, enabling them to reach a higher standard of living.
Increasing manufacturing and infrastructural development activities is leading to increased demand for commercial vehicles. Logistic and construction industries have been the largest sources of demand, benefiting from the growth of export-oriented industries, trading activities, and many on-going infrastructure projects.

Potential Segment

Assembling and manufacturing

The government is encouraging building of semi knocked down (SKD)/ completely knocked down (CKD) assembly/ manufacturing plants for commercial vehicles, passenger vehicle including EEV for domestic market in the country through the generous fiscal incentives and tax holidays.

In addition, the newly developed automobile policy 2020 proposes additional export subsidies along with tax benefits and concessional loan benefits to purchase locally assembled vehicles. Besides, the existing higher import duties associated with CBU import provide a ground for stable local production during the developing stage of the industry.

Parts/ components production

Manufacturing of parts and components is also one of the key agendas of the National Automobile Policy 2020. Generous tax holidays and fiscal incentives are provided to encourage the development of the segment.

Check incentives link : Sector specific
Location specific

Incentives and Policy

Sector Specific Incentives and policies

Fiscal Incentives:
Income generated from automobiles (three and four-wheeler) made in Bangladesh will be exempted from tax for first 10 years of production and will enjoy reduced tax rate for the next 10 years

Conditions

At least BDT 1 billion investment is required.
For the first 10 years, 30% value addition is compulsory to get 100% tax exemption.
For the next 10 years, if they can achieve 40% value addition then tax rate will be only 10% otherwise general tax rate will be applicable.
Within first 5 years after getting approval; car engine, transmission system, and steering system has to be added from own factory.

Automobile/automobile parts components manufacturing entities that are established between July 1, 2019 and June 30, 2024 are eligible for phased or partial tax exemption for 5 to 10 years depending on the location of their businesses.

Conditions

Paid-up capital of not less than BDT 2 million on the date of beginning of commercial production.
30% of the exempted has to be reinvested in the same or other industrial undertakings within one year.
Others

Key Highlights of the Automobile policy 2020

Encourages local assembly and manufacturing through tax holiday and fiscal incentives and favorable import duties
Provides export subsidy
Development of sound domestic market for brand-new vehicles.
Development of local parts/ components production through progressive localization plan.
Promotion of R&D and development of design and testing functions.
Formulation and enforcement of vehicle standards (quality, safety and emission).
Development of industrial human resources.
Improvement of business climate specific to automobile industry.

For further details download full Policy:

National Automobile Policy 2020

Partner Organizations

Industry Associations

Automobile Component and Accessories Manufacturers Association (ACAMA)
Bangladesh Automobile Assemblers & Manufacturers Association (BAAMA)

Resources

Download Sector Profile

Source: Bangladesh Investment Development Authority (BIDA)