In a significant move during Bangladesh’s economic struggles, Honda has begun to export motorcycles from its plant in Gazaria, Munshiganj. On September 3rd, the company shipped 14 Honda X Blade 160 commuter motorcycles to Guatemala. The shipment was sent by sea to the Central American market.

Bangladesh Honda Private Limited (BHL) is a joint venture between Japan’s Honda Motor Company and Bangladesh Steel and Engineering Corporation. This move makes Honda the second company to export motorcycles from Bangladesh, following Runner Automobiles. It is seen as a step towards improving the country’s foreign exchange reserves, which have been under pressure.

BHL plans to explore other markets in the Americas and Africa, expanding its global reach.

During the launch ceremony at the BHL plant, officials noted the challenges of acquiring foreign currency. The company needs these funds to import raw materials and knockdown (KD) parts for manufacturing motorcycles in Bangladesh. The ongoing foreign currency shortage has made it difficult to meet the growing domestic demand for Honda motorcycles.

BHL Managing Director and CEO Shigeru Matsuzaki said, “The solution to this challenge lies in our two-pronged approach— increasing local procurement and initiating exports to earn foreign currency. This should contribute to Bangladesh’s economic resilience.”

Honda, a global leader in motorcycle manufacturing, has production facilities in 21 countries, including Bangladesh. However, BHL’s Chief Marketing Officer, Shah Muhammad Ashequr Rahman, mentioned that production costs in Bangladesh are higher than in other markets. “Excluding the duty on imports of raw material and components, manufacturing costs in Bangladesh are over 10% higher than in larger two-wheeler hubs,” Rahman explained.

Despite these challenges, Honda is committed to Bangladesh. Rahman emphasized the need to scale up production and add more local value. He believes that exports will play a key role in making manufacturing more cost-effective.

The government currently offers a 0.05% cash incentive on motorcycle exports. However, Rahman noted that this is insufficient to cover higher production costs. To stay competitive, BHL has two options. It can seek duty-free imports of raw materials or apply for a duty drawback after exports.

Both options have complications. Setting up a bonded warehouse for duty-free imports would require significant investment. On the other hand, duty drawback procedures in Bangladesh are slow, taking over five years. This delay would require additional working capital in the hundreds of crores. “To become competitive in motorcycle exports, we need duty-free imports of raw material and components against bank guarantees only,” Rahman added, drawing from his experience in finance.

BHL is working with the National Board of Revenue (NBR), Duty Exemption and Drawback Office (DEDO), and its banking partners to support its export plans.

BHL’s Chief Production Officer, Hiroyuki Yasunaga, emphasized that the Bangladesh plant maintains the same rigorous standards and quality control as other Honda facilities worldwide.

Bangladesh’s motorcycle industry has faced ups and downs. The government’s 2018 Motorcycle Industry Development Policy aimed for 1 million units per year by 2027. However, after peaking at 640,000 units in the 2021-22 fiscal year, sales dropped below 400,000 in 2023-24. This decline is largely due to the economic slowdown following the Ukraine war.

In contrast, Guatemala’s motorcycle market continues to grow. It recorded its 12th straight year of record sales in 2023. Last year, Honda sold over 56,000 units in Guatemala, holding nearly a quarter of the market. In Bangladesh, BHL held about 15% of the market in 2023-24. Guatemala is now the 21st largest two-wheeler market globally, according to motorcyclesdata.com.

Honda’s export move marks a significant step for both the company and Bangladesh. As Honda expands globally, its presence in Bangladesh is expected to strengthen, benefiting the local economy and boosting the company’s position in international markets.

Source: The Business Standard