Motor vehicle parts and accessories traders in Bangladesh are grappling with various problems mainly due to rising import costs, import-centric market, and a shortage of skilled labour.
However, industry players have urged the government to help them in opening letters of credit (LCs) with banks for import of motor vehicle parts and accessories, setting up manufacturing hubs and gaining access to loans.
The motor vehicle parts and accessories market depends heavily on imports, with China playing a dominant role, although there has been a gradual increase in the production of certain items in Bangladesh.
According to the Bangladesh Bank data, total import payment for motor vehicle parts and accessories was $89.97 million in the fiscal year 2023 compared to $1,00.75 million in FY22 and $1,07.30 million in FY21, showing a declining trend.
In FY23, parts and accessories worth $51.542 million were imported from China alone which accounted for 57.3 per cent of total imports.
With over 30,000 parts in a single car and various decorative items, the sector encompasses a wide range of products, each subject to varying tax rates.
Babul Miah, owner of Babul Motors, a car accessories and motor parts importer and retailer, said, “I have been doing this business for 17 years. This business had a glorious past. But now the situation is so bad that some traders quit this sector.”
“The country’s current economic situation is not good. That’s why we could not import as per the demand. We faced problem to open letters of credit (LCs) with banks. Import is totally off. When we go to banks to open LCs they tell us that this is a luxurious item and they reject our LC order,” he added.
“The government increased tax 200 per cent on sales of decorative items in the last five years where our business slowed down by 50 per cent from previous years. Trade licence, signboard and other tax have been increased but everyone is not included.”
“The government restricts imports so that the domestic market can expand but there is no facility for manufacturing parts. If small and medium-sized enterprises (SME) get the opportunity, they can also perform well and export items to different countries,” Babul said.
According to Babul, there are more than 400 parts shops across the country, with 150 importers specialising in the decoration line. In total, there are approximately 1,000 shops, including those dealing in motor vehicles.
The size of motor vehicle parts and accessories market in Bangladesh is estimated to be between Tk 20,000 crore and Tk 25,000 crore, showing annual growth. Key market players include China, India, Japan, Korea, and the UK.
SM Syeed Sufi, another businessman involved with this sector said, “This is a fast-growing business. Apart from electronics items, other items could be manufactured in our country and the quality is better than China.”
“Our import cost is increasing rapidly, once the cost was $4,000 per container which doubled to $8,000 leading to a price hike of each item and less sales in the market.”
“If the government supports us then we can make good products at 20 per cent lower price than China which can be exported abroad after meet the country’s demand,” he added.
According to Bangladesh Road Transport Authority (BRTA), 59,26,113 motor vehicles have been registered in Bangladesh as of November 2023 which is increasing day by day.
Businesses have called for recognition of Dholaikhal, Jinjira and some other places in old Dhaka as light engineering manufacturing hubs to boost the business.
There are many items which are manufactured domestically such as vehicle floor mat, seat-cover, steering cover, bumper, etc. which are affordable and also can be exported to different countries in the world.
Md Habib Ullah Dawn, president of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA) said, “The number of cars in the country is increasing day by day. On average 170-180 vehicles are registered every day, so this sector will also grow.
“Though this sector is dependent on imports, small-scale factories have been established in different parts of the country. If the government pays attention to this sector and provides loans to small and medium businesses on easy terms, then this sector will become bigger,” he added.
Motor vehicle parts and accessories business was concentrated in capital city like Bijoynagar, Banglamotor, and Moghbazar. However, there has been a shift towards area-focused establishments.
Unfortunately, this transition has been met with hurdles, one of them being a scarcity of skilled individuals in the sector. Some entrepreneurs, having started from scratch, lack comprehensive knowledge about the intricacies of the industry.
