Bangladesh Motorcycles industry run was sharply stopped in 2023. Huge price increase and skyrockets interest rates cooled the demand and the market dropped 21.4% after years of records.
Motorcycles Market Trend in 2023
Following years of continue sales increase, the domestic two-wheeler market sharply declined in 2023, with total sales at 461.085, down 21.4%.
The deep increase on prices was effective in the industry as well with a minimum 10% increase in the MSRP price for al motorcycles models. In the reality, the real price increase was higher and closer to 20% considering the transaction price.
While until 2022 in a growing market and with all OEMs fighting to gain market share the discounts offered to purchase new models was over 10%, during 2023 the discounts dramatically fell down, near zero.
In addition, the interest rate required to finance a motorcycles purchase skyrocket at around 10%.
The consequence, in a market with one of the lowest level of purchase power and extremely sensitive to price variation, was a sharp reduction in the consumer demand.
All manufacturers lost sales, while the competitive scenario did not changed, with Bajaj Auto still market leader, with over 25% market share, followed by Yamaha, Runner, TVS Motor, Honda and Hero.
Motorcycles Market Heritage
The two wheelers represent the main individual mobility device in the country and has huge space for growing up in the next decade, in line with a growing per-capita income.
With a population of 167 million people and an annual GDP growth averaging over 7% in the last five years, and high remittance from expatriates, Bangladesh represents one of the World’s Top 5 emerging economy for the next decade. Despite doubled in the last five years, the pro capita income is still among the lowest in the World (US$1.829 in the 2019), but it is projected to double within the next five years.
The economic boom created a huge demand for individual mobility and the two-wheeler industry represents the most efficient solution, following the pathway already tracked by several others South Asian countries.
Fortunately, local governments have embraced this philosophy and have put in place a range of tax initiatives, import policies, incentives to innovation.
A decade ago the objective was to support the start-up of local production, creating barrier to imported vehicles and components, but in the most recent years a more opened view has taken space and the government has reduced duties on imported parts (from 25% to 20%) and on imported models.
Bangladesh, as one of the rare countries in the world with motorcycle engine capacity restrictions, at the end of 2021 decided to follow the Tariff Commission’s recommendation and applications from several new investors, moved up the limits for road motorcycles from 250cc to 500cc opening the market to new opportunities.
The first new entrance was the Indian Royal Enfield, leader in this segment in the entire region. IFAD Motors Ltd. has immediately signed a memorandum of understanding with Royal Enfield to import (and probably locally produce) their product in the country.
The Indian Bajaj Auto is producing locally since the 2015 and was immediately followed by TVS, Hero Motors, Suzuki and Yamaha.
The last to open a plan was Honda. Indeed, Honda opened its motorcycle plant in November 2018 with a current capacity of 200.000 annual production.
Actually over 80% of two-wheelers sold in Bangladesh are locally manufactured.
In Bangladesh, the import duty is 45% keeping the motorcycles prices about 2.5 times higher than those in India. However, local manufacturers can agree with the government a discount on this duty, if they produce at least one fifth of the bike in the country.