Cars up to 1600cc likely to be more affordable for middle class

The Prime Minister's Office (PMO) has asked the commerce ministry to submit a detailed report on whether the 0-1,600cc single slab for automobiles could be split up into three categories so that more middle-class people can afford small cars.

The PMO move also looks to mapping out how the budding local auto industry could be facilitated.

Currently, the single slab changes a unified tariff. As a result, importing a car with 800cc engine capacity costs the same as a 1,600cc vehicle, deterring middle and low-income people from buying cars.

The unified tariff for up to 1,600cc cars is around 91% for new autos. The duties and taxes go as high as 130% for import of reconditioned vehicles.

The size – or cubic capacity – of a car's engine is measured in cubic centimetres (cc). It refers to the amount of air and fuel that can be pushed through the cylinders in the engine. In most cases, the general rule of thumb is that the bigger the capacity, the more powerful it tends to be.

Popular auto brands in Bangladesh such as Toyota Axio, Toyota Allion and Toyota Fielder range around 1,500 cc, while lower cc cheap brands include Wagon R 1,200 cc and Maruti Suzuki 800-1,200 cc.

To attract foreign investors, the government last year announced its Automobile Industry Development Policy with fiscal perks such as tax rebate on purchase of made-in-Bangladesh cars and cash incentives on export of locally manufactured or assembled autos.

Meanwhile, local group Uttara Motors Ltd has already invested in assembling and manufacturing cars locally with Japan's Suzuki Motor Corporation in Chattogram's Bangabandhu Sheikh Mujib Shilpa Nagar.

Several other local companies are also set to invest in the automobile industry after teaming up with Japan's Mitsubishi and Korea's automobile company Hyundai.

Matiur Rahman, chairman and managing director of Uttara Group of Companies, applied to the PMO recently, seeking the split-up of the single slab to 0-800 cc, 801-1,200 cc and 1,201-1,600 cc.

On 18 January, the PMO subsequently asked the commerce ministry to prepare a detailed report.

Matiur Rahman declined to talk about the matter when approached for comments.

In the proposal to the PMO, he wrote, "If the single slab is split up into three, more middle-class, low-income people and professionals will be able to buy cars."

He also mentioned that if the import policy is reconfigured after the split-up, there will be more local and foreign investments for car assembling and manufacturing in Bangladesh.

The Uttara Group chairman also talked about achieving self-sufficiency in auto manufacturing and better competing in the international market.

According to the Bangladesh Road Transport Authority, demand for cars in Bangladesh has been increasing rapidly since 2014.

In that year, more than 1.5 lakh cars were registered; the number jumped to nearly 4.9 lakh in 2019. It dropped to around 3.7 lakh the following year due to the pandemic, but rose to more than 4.45 lakh last year.

Bangladesh has 3 cars per 1000 population, compared to 897 cars per 1000 in Malaysia. Even neighbouring Myanmar has 129 cars per 1000 persons. In Vietnam, car ownership per person is 3 times that of Bangladesh, according to a research paper of the Policy Research Institute of Bangladesh published last year.