A big factory blaze leaves Tk 80b tyre market for grabs

A big factory blaze has blanked out Bangladesh's huge heavy-duty vehicles' tyre market for invasion by imports while local manufactures of ultra-light-vehicle tyres also fear losing out to foreign companies for two major constraints.
They say production disruptions for gas shortages and cost - overpricing due to customs hassles like indiscriminate taxing are hurting the local tyre industry.
The country's overall burgeoning tyre industry is facing crunch time as the local entrepreneurs, have been shying away from undertaking capital-intensive ventures of making tyres for car, bus and truck which constitute 80 per cent of the nearly Tk 80-billion tyre market, mostly unmet following the fire havoc at the lone major industrial complex in the sector.
Talking to The Financial Express, they described the prospect the industry holds amid a fast expansion of the transport sector and sought proper policy support from the government to enable them to set their footprint on this market which is being dominated by foreign companies from countries like India and China.
Industry-insiders said after the demolition of Gazi Tyre factory in fire--just after the fall of the past government and nemesis of this factory owner and minister--the industry is right now "crossing a critical stage with all the major players scrambling to grab its share", which was an overriding 70 per cent of the market.
"But gas shortage hampers 30 per cent of our production," says Lutful Bari, CEO of Meghna Group, reminding that tyre industry is gas-intensive, too.
The industry people ring the alarm that Gazi's absence from the market created a large vacuum and if the local manufacturers failed to fill the gap, countries like India and China will invade the gap.
Presently, the over Tk 20-billion market of the light vehicles like bicycle, motorcycle, easy bike, and CNG scooter are totally dominated by the local manufacturers.
"So it is critical to ensure smooth supply of gas as the tyre industry is totally energy-intensive," Mr Lutful adds.
"Another major impediment for us is hassles during the customs clearance," says Miraj Rahaman of RupshaTyre and Chemicals Ltd, another key market player.
"Customs officials frequently charge higher duties on import of our raw materials by raising the unit prices," he says about restrictive taxing that pushes up cost price of the product.
On one occasion, he cites an example, when customs officials determined inflated prices for their imported raw materials, the exporter flew in from Saudi Arabia with documents that the declared prices were correct. But the customs "even disregard his documents and stuck to their assessment".
There are more of such hindrance rather than help. The manufacturers allege that chemicals used in the tyre industry as raw materials are often sent to laboratory for sample test after, import which is time-consuming.
"Such test should be exempted for the same item manufactured by same exporter," says Mr Lutful, suggesting out that especially the importers who do not have any bad record should be exempt from such test.
The ruining of Gazi Tyre factory resulted in a huge supply shortage, he mentions and says, " If we cannot fill the gap timely, this marker share will go to India and China."
The entrepreneur pleads for immediate government measures to resolve gas crisis and to remove bottlenecks in customs clearance--a common complaint from many a businessman.
Among the light-vehicle tyres, only the motorcycle-tyre market is dominated by importers who have over 60 percent market share.
On the other hand, the over Tk 50-billion tyre market of heavy-duty vehicles like bus and truck, and light vehicles like car are totally dominated by foreign players, especially India.
The industry- insiders have told the FE that the aggregate Tk 80-billion tyre industry has seen huge growth in recent years and still has the huge potential to grow riding the surge in vehicle arrivals.
In 2010, the number of vehicles in the country was 1.427 million, but in 2023, the number climbed to 5.864 million.
According to BUET statistics, the demand for tyres for heavy and commercial vehicles in the country is 70,000 units every month, and another set of statistics shows that total demand for tyre as 2.5 million every year.
According to Techsci Research, an industry-research organisation, Bangladesh tyre market is anticipated to post a robust growth in the forecast period with a CAGR of 10.27 per cent in the next five years.
"The tyre market in Bangladesh is experiencing steady growth due to increased demand from various sectors. The primary drivers include the burgeoning automotive industry, combined with an upturn in the commercial and heavy-duty vehicles segment, as infrastructural and construction projects escalate across the country," the report says.
According to experts, lack of technology and the dominance of imported brands are major impediments to manufacturing tyres of these vehicles.
Few years ago, Jamuna Group started to set up its Tk 20-billion factory aiming to produce tyres for car, bus and truck by the year 2021.
But till now they cannot start production as they find that the entire process is very complicated and that to fight with the foreign brands is tougher than anticipated, an insider has said.
Recently, they started trial run but still they were not sure whether they will start full production.
On the other hand, Indian company CEAT, originally an Indian brand, has announced its plan to set up a manufacturing plant with an investment of $4.99 million in collaboration with A K Khan Limited, but no progress is in sight either.
Asked about the failure of the local manufacturers to make inroads in light-vehicle and heavy-vehicle segments, Mr Miraj of Rupsha Tyre said, "We do not have sufficient technological expertise for producing tyres for bus, truck or car."
In India, leading tyre manufacturers like MRF bought technology at a cost of Tk 30 billion from a western company. "In our country no company is prepared to do this," he explains, adding that manufacturing such tyres requires 62 raw materials.
Rupsha is pioneer in rubber industry in the country, starting off with producing sandals after liberation.
"Later, we switched to tyres but still we are trying to acquire the full knowledge of this industry," he told the FE, adding that in future they may go for manufacturing tyres for bus, truck and car.
Experts feel that as Bangladesh lacks raw materials for tyres, it should be made cheaper to the manufacturers by reducing import duty.
At the same time, the import duty on finished tyres should be raised to pave the way for the local manufacturers to go for producing tyres of cars, bus and trucks.
This segment has a hefty market share of around TK 80 billion and grabbing some portion of the share will save huge foreign exchange for the country.

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