India's popular Bajaj motorcycles will be manufactured in Bangladesh from June next year, a move touted to make the brand's vehicles 30 percent cheaper.
Uttara Group, Bajaj Auto's local assembler, is set to build a plant at a cost of Tk 150 crore, to be operated by the leading Indian two-wheeler manufacturer. Bajaj will provide all technical support including product design, research and development.
Matiur Rahman, managing director of Uttara Group, said the unit price of Bajaj-branded motorcycles may decline around 30 percent once production starts at the plant. The factory will span 10 acres of land at Zirani Bazar in Gazipur.
Some 20-25 components including chassis, chain, swing arm, suspension, battery, tyre and plastic accessories will be manufactured at the plant, sufficient to give the motorcycles the 'manufactured in Bangladesh' tag.
The other components such as engine will be brought over from India, he said.
As per custom rules, an assembler will be termed a manufacturer if its value addition is at least 30 percent and if it can locally produce at least seven components: frame, main stand, side stand, real swing arm, handle bar, tension rod and engine clamp.
A manufacturing unit should also have to have power coating plant and other facilities for injection moulding, dye casting, salt spray testing, pipe bending, and hydraulic press, according to a notice from the National Board of Revenue.
The factory, whose layout plan is currently being finalised, will initially manufacture four models -- Platina 100, Discover 100, Discover 125 and Pulsar 150.
Its annual production capacity will be 1.5 lakh units and it will employ around 450 people including 2-3 foreign employees, said Rahman, also the chairman of Uttara Group.
Bajaj Auto's move though comes on the heels of its rival Hero MotoCorp's arrangement with the local Nitol Niloy Group, in response to the fast rising demand for motorcycles in the country.
Hero MotoCorp, India's largest motorcycle manufacturer, will set up its manufacturing plant in Jessore by 2015 in a joint venture with Nitol Niloy Group and invest $40 million in five years.
Rahman credited the increasing purchasing power and development of rural economy for the growing demand for two-wheelers.
Around 60 percent of Uttara Group's motorcycle sales come from rural areas, he said, adding that farmers, small traders, wage earners and pharmaceutical companies are the main buyers of two-wheelers.
The industry sold 10,000-15,000 motorcycles annually 15 years ago, which is just a monthly sales figure these days, he said, adding that payment in instalments is one of the reasons for the rise in sales.
Many unemployed youths in the rural areas are particularly taking advantage of the facility, he said.
“They are getting their hands on motorcycles by providing just Tk 10,000 as down payment and then using it to ferry passengers around the remote areas. They pay the remaining sum on a daily basis using the fares.”
Uttara Group, whose two-wheelers cost between Tk 1.12 lakh and Tk 1.99 lakh, has so far sold around 2 lakh units to this segment, according to Rahman.
In fiscal 2013-14, the assemblers and manufacturers altogether sold around two lakh motorcycles, up from 182,764 units the previous year, he said, adding that the Indian Bajaj brand now holds around 60 percent share of the market.
Walton, Runner, TVS and Yamaha are the other leading brands. Established in March 1972, Uttara Group started selling Bajaj motorcycles in Bangladesh in 1988.
Currently, it has 200 dealers to sell motorcycles across the country, with plans to add 100 more within next year. It has also around 500 authorised service centres across the country. The company has also plans to export motorcycles especially to the African markets.