Sale of motorcycles in the country is continuously dropping since imposition of Supplementary Duty (SD) in the 2015-16 budget though almost all the brands are reducing prices of their vehicles for the sake of competition, industry insiders said.
The government has raised SD on motorcycle components to 45 per cent from 30 per cent in this fiscal, mainly to encourage local manufacturing of the item.
Uttara Motors executive director Kazi Emdad Hossain said their motorbikes sale target was 1,25,000 units for this year, but they think it would be hard to sell 80,000 units.
Uttara Motors is the sole distributor of Bajaj brand motorcycles from India, having 55 per cent of market share. It has also cut prices of different brands extensively.
Mr. Hossain said their motorbike import has dropped by around 50 per cent during the last four months, following 40 per cent fall in overall sales due to new tax hike in the national budget.
The government's main intention behind the hike in SD and other taxes was to protect the local industry, but their sale has also declined.
"Sale of two-wheelers is witnessing a sluggish trend in the last couple of months because of high registration cost, which is up to 14 per cent of total value of a medium-priced motorbike," said Motorcycle Manufacturers and Exporters Association of Bangladesh (MMEAB) president Hafizur Rahman Khan.
Mr Khan, who is also chairman of Runner Group that manufactures Runner brand motorbikes, said the registration fee of a two-wheeler is much higher than those of a three-wheeler or a four-wheeler.
The country's second largest CKD motorbike seller - Bangladesh Honda Private Ltd - officials said their sale has dropped by around 31 per cent.
Between July and October, 46,745 units of motorcycles were sold, in contrast to 68,233 units a year earlier, according to data provided by Bangladesh Honda Private Ltd, a joint venture company of Japan's Honda Motor Company and the state-run Bangladesh Steel and Engineering Corporation.
Bangladesh Honda managing director Yoichi Mizutani said, "We requested the government not to raise the supplementary duty, but nobody listened to our pleas".
However, sale of motorcycles has been gradually decreasing in the country during the last five years. The sales volume was 255,000 pcs in 2010-11 financial year, 2,30,000 pcs in 2011-12, 2,20,000 pcs in 2012-13, 1,84,000 pcs in 2013-14, and 175,000 pcs in 2014-15, according to MMEAB data.
The manufacturers and dealers blamed high prices of the vehicle, continuous fuel price hike, increased tax and bike registration cost, overall economic slowdown, police drive against unregistered motorcycles, and availability of smuggled Indian two-wheelers for the situation.
"The high supplementary duty will cut motorbike sales to about 148,000 units this fiscal year, the lowest since 2008-09," Mr Mizutani told The Financial Express.
He said the registration fee for a motorcycle with 125 CC engine is $273 in Bangladesh, which is much higher than in India, Pakistan and Sri Lanka, where $53, $27 and $52 is charged respectively.
The Bangladesh Honda managing director opined that the manufacturers' price cut will not only exhaust them but will ultimately destroy the market.
He said the motorcycle user ratio in Bangladesh is very negligible compared to other Asian and South Asian countries.
One motorcycle is being used for every three persons in Thailand, one for four persons in Indonesia, one for every 13 persons in India, and one for every 18 persons in Pakistan, whereas every 300 persons use one motorcycle in Bangladesh.
"Proper and logical duty structure will help patronize and flourish local motorbike assembling industry. Subsequently many of the assemblers will be encouraged to turn into manufacturers."
Mr Mizutani said if this high tax structure exists, foreign investors of the sector will have to rethink whether to continue business in Bangladesh or not.
Bajaj and Hero are currently setting up assembling plants in Bangladesh, following Bangladesh Honda, which has been assembling motorcycles in the country since October 2013.
To attract foreign investment in this sector, an annual demand for minimum 1.0 million bikes is required, Mr Mizutani opined.
"I request the National Board of Revenue (NBR) again and again to reduce the taxes on the vehicle and let its market expand. This is the first step," he added.
Shah Muhammad Ashequr Rahman, head of finance of Bangladesh Honda, said motorbike is not a luxury vehicle. Mainly middle-class people use the vehicle. Even Tk 1,000 matters to them.
"New prices of motorcycles have already gone beyond customers' buying capacity, especially in rural areas."
"We don't want people using unregistered motorbikes. But if such irrational registration costs exist, they won't be interested to register their vehicles in the rural areas, where control of the authorities concerned is relaxed," he added.
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