New CKD definition sparks off mixed reaction from local motorbike makers

The change in definition of completely-knocked-down (CKD) kits in the new Statutory Regulatory Order (SRO) has sparked off mixed reaction among leaders of the local motorcycle manufacturing industry.  

Some say the decision will adversely affect local manufacturing and development of motorcycles, while others welcome the decision as a positive initiative by the government.

On January 28, the National Board of Revenue (NBR) issued a circular for changing the definition of CKD, allowing local assemblers to import engines with gearboxes and speedometers instead of having to import those separately. 

Speaking to Business Insider Bangladesh, Subrata Ranjan Das, executive director of ACI Motors Limited, said the government has changed the 23-year-old SRO only to reduce customs duty on imports.

He explained that as the technology has updated a lot over time, the new SRO will be supportive to importing CKD motorcycle parts. 

It will help import updated and modern motorcycle parts, he added.

He further said this SRO is not discriminatory towards local manufacturers as customs duty is fixed at 92 percent for CKD and at 38 percent for local manufacturers. The duty gap is reasonable and it will not hamper local manufacturing, he added. 

However, Abdul Matlub Ahmad, chairman of Nitol-Niloy Group, said local and foreign investors will not be encouraged in investing in the sector anymore.

He said the new SRO will never help develop local vendors or the overall capacity of the local industry.

There is a lack of duty gap between that of local manufacture and imported ones, which is harmful for the local industry, he said.

A senior official of a global motorcycle giant, who has a manufacturing plant in Bangladesh, termed the SRO as a conspiracy against the potential of the growing industry.

As the government slashed supplementary duty on unassembled parts of motorcycle by 25 percentage points to 20 percent to increase local production, the SRO will boost motorcycle sales which have been down in recent times for the first time in three years.

Sales dropped 11 percent year-on-year to 4.7 lakh units in 2020 from nearly 5.30 lakh units, showed data from the Bangladesh Motorcycle Assemblers and Manufacturers Association.

Previously, the government had formulated the Motorcycle Industry Development Policy in 2018 to diversify apparel-dependent exports of the country.

Through the policy, it aimed to increase contribution of the sector to the GDP to 2.5 percent from 0.5 percent by expanding the industry's capacity to assemble motorcycles. The policy also tried to increase local manufacture of motorcycles to 5 lakh per year by 2021 and double the volume by 2027.

Once the policy was formulated, Honda, Bajaj, Yamaha, Hero and TVS started manufacturing motorcycles in Bangladesh, bringing foreign and local investors together.

Local manufacturers like Runner, New Grameen and Roadmaster are also trying to improve their technology and go for exports to Nepal, Bhutan and other countries.

Against this backdrop, Japanese automobile giant Honda set up motorcycle manufacturing plants in Bangladesh.

The plant, which was set up for Tk230 crore on 25 acres of land in the Abdul Monem Economic Zone (AMEZ) in Munshiganj, helped save foreign currency and make motorbikes more affordable.

Besides, IFAD Group is keen to invest Tk433.5 crore to set up an industrial complex at the Bangabandhu Sheikh Mujib Shilpa Nagar as it looks to make a foray into the growing motorbike and automotive component segments.

According to industry insiders, investment in the sector currently stands at around Tk8,000 crore.