Three-wheeler manufacturing set to thrive

Infographic: TBS

After Runner Automobiles that already has begun trial production of Bajaj three-wheelers in Mymensingh's Bhaluka, another automobile conglomerate Nitol-Niloy has announced a Tk300 crore investment to manufacture TVS three wheelers in Bogura.

The government's latest policy support, such as a 10-year corporate tax break and only 10% for the next decade and a 15% VAT waiver up to at least 2025 for manufacturers, has propelled them to make an entry into the three-wheeler segment with a big investment.

Thus, total taxes and duty on parts and raw materials for manufacturing three-wheelers have substantially declined to around one-third of the import value from around 90% for the completely built units (CBU) that the country has long been depending on.

"The investment will enable us in local manufacturing, job creation, and will offer some price benefit to customers," said Abdul Matlub Ahmad, chairman of Nitol-Niloy Group.

Indian company TVS will be the "principal". That means Nitol-Niloy will manufacture the TVS branded three-wheelers under its technical collaboration, while TVS would also be the supplier of raw materials and parts that cannot be locally sourced, he explained the nature of the planned venture.

A large shed on a 45 bigha plot in Bogura is ready for installation of machinery that should be done in six months.

Due to registration issues in the passenger-carrying three-wheeler segment, his company will begin with cargo three-wheeler production.

Nitol-Niloy Group is the local assembling and distribution partner of Tata commercial vehicles and cars.

On roads where pickup vans cannot enter or cannot be afforded, low-cost fuel-saving cargo three-wheelers will be a good solution for the people and businesses across the country, said Matlub Ahmad, who is also president of Bangladesh Automobile Assemblers and Manufacturers Association.

Considering the current sourcing cost and exchange rate, his company might be able to sell a diesel-run TVS branded cargo three-wheeler at Tk3.75 lakh, which will be nearly one-fourth less than the price of a CBU unit.

Runner Automobiles Ltd, the motorcycle manufacturing pioneer in the country, is going to sell locally made Bajaj three-wheelers in a few months as its trial production is going on under the quality control of its principal Bajaj, the world's largest three-wheeler company.

Both the companies will weld three-wheeler chassis and body, paint them locally, and assemble engine and other parts, while they are looking for local vendors for as many as items they can supply, of course through ensuring quality.  

Bangladesh used to assemble some imported two-stroke three-wheelers up to the early 2000s when the government banned the polluting vehicles in Dhaka.

Since then, the country has imported at least half a million four-stroke three-wheelers, mostly run by compressed natural gas (CNG). Liquefied petroleum gas (LPG) and diesel have also emerged as the other low-cost three-wheeler fuels in recent years.

Potential enormous, registration has to be allowed 

Due to its smaller size and the comparatively lower costs of ownership and fuel, three-wheelers are popular across Bangladesh, be it on urban or rural roads.

But the annual market for three-wheelers has been much smaller than its potential as the government allows only a limited number of vehicles to be registered for a specific district.  

And that created a huge transportation market of unregistered three-wheelers that dominate the roads across Bangladesh through bribing or managing local authority officials.

Demand being higher than supply made it feasible for vehicle owners to spend much more unofficially on running unregistered three-wheelers than the costs of official registration fee and road tax.

Over half of the units sold by authorised three-wheeler brands Bajaj, TVS and Piaggio remain unregistered in the country.   

Three-wheeler marketers say the annual demand for authorised three-wheelers having engine, chassis numbers, and type approved by the authorities, peaked to nearly 40,000 units in a year when big cities allowed registration; and it halved when some sporadic registration was allowed in districts.

Due to a prolonged school closure, a series of lockdowns during the pandemic, three-wheeler owners suffered opportunity losses and in the last fiscal year, demand for three-wheelers shrank to below 14,000 units, said Shanat Datta, chief financial officer of Runner Automobiles, which has been marketing Bajaj LPG three-wheelers since 2017.

Bajaj serves over 95% of the market and Uttara Motors, another automobile conglomerate, is the distributor of imported Bajaj's CNG-run three-wheelers.

In the last two months, three-wheeler sales have been picking up again despite the soaring price and he estimates that the market will recover the historic peak in the coming years.

His company is also planning to reduce locally-manufactured unit prices as much as it can so that people and small businesses can afford three-wheelers for short- and mid-distance trips.

The authorised three-wheeler industry has long been pushing the government to end the parallel registration universe across the country that is not limiting the number of vehicles on roads at all, but instead allowing some corrupt officials pocket much more in bribes than what is needed for the official fees and road taxes.

Also, the industry has proposed that the government phase out unauthorised three wheelers through allowing authorised ones' registration.

While talking to The Business Standard, Runner Chairman Hafizur Rahman Khan said that authorised unit owners pay the government around Tk14,000 during registration and Tk10,000 a year as road tax, while the government gets nothing against the unregistered or unauthorised three wheelers.

Nowadays, around 40% of the sold units get registered, while the majority stay on the road unregistered using bribery.

If registration of authorised ones opened, unauthorised three wheelers will be phased out gradually, roads will be safer, and the Bangladesh Road Transport Act, 2018 will be implemented.

Phasing out the 30-40 lakh unauthorised three wheelers can give the government Tk30,000 crore to Tk40,000 crore or even more revenue in the next one decade, he added.