In developed countries, electronic and autonomous cars are gradually replacing conventional cars, while emerging markets, especially in South Asia and Africa, still rely on affordable mobility solutions such as reconditioned cars.
Though it is impossible to estimate the amount of imported used vehicles due to the lack of a proper record, previous studies have shown that 80-90% of the imported vehicles in African countries are old and used. Such vehicles are mainly used by the US, Europe, and Japan.
Bangladesh’s car industry has been heavily dependent on imported reconditioned cars. More than 80% of all passenger vehicles are imported reconditioned cars, mainly from Japan. Even historically, Japanese refurbished cars have played a vital role in bridging the gap between affordability and reliability.
Why Japan?
One of the main reasons that people rely more on Japanese reconditioned cars is their credibility. Japanese cars generally have powerful engines, better quality and materials, and fuel efficiency. For instance, Toyota and Honda are well recognized for their performance, longevity, reliability, and availability of car parts, with minimal repairs required. Even Japanese carmakers are well known for their skills to make cars durable and fuel-efficient.
While maintaining car longevity is one of the targets of Japanese automobile companies, they also try to minimize car costs, which are significantly lower than those of Europe or the US.
Japanese cars also meet high-performance driving standards, even in the reconditioned ones, while maintaining simple functions, cost-effectiveness, and environmental standards. However, the reasons are completely different from those of the supply side, and one of the main causes is the effect of Japan’s ‘Shaken Law.’
The Shaken Law or Vehicle Inspection Law requires vehicles to be inspected in Japan to check whether they meet safety, environmental, and roadworthiness standards. This law is crucial for Japanese car owners and has significant implications for the global reconditioned car market. Though buying a car in Japan is not expensive, maintaining one is difficult as parking is quite expensive and the roads are mostly narrow.
Also, this law makes it difficult to keep a car for a long time in Japan as one needs to spend a lot of money frequently to maintain the Shaken standards. As a result, many Japanese car owners find it economical to sell or trade their cars after some years rather than maintain them for extended periods.
These used cars, often in good condition, are sold to low-income and lower-middle-income countries worldwide, especially where affordability is the actual concern, and such laws do not exist or have minimal applications. The turnover of these refurbished cars fuels this export market that benefits both Japanese car dealers and international buyers from Africa and Asia, where the demand for low-cost and high-quality used cars is significant.
Local automotive industry in Bangladesh
Bangladesh’s domestic automotive market is quite small. The country’s vehicle manufacturing and assembling sector cannot flourish due to the absence of international car manufacturers, lack of raw materials, and lack of backward linkages. The supply of automobiles here is primarily dominated by reconditioned cars, predominantly imported from Japan, China, and India. A few of them are also imported from the US and some European countries.
If you look at the roads in Bangladesh, you will see mostly Japanese-brand cars for personal use. Most customers prefer Japanese car brands, including Toyota, Mitsubishi, Honda, Nissan, etc., over European brands like Mercedes, Audi, and BMW. These are mostly reconditioned cars that have been used for at least two to three years. The flow of such cars in Bangladesh started in the 1980s.
As there is no strong vehicle assembling industry and cars are still considered luxury items in Bangladesh, the prices of imported new cars can even cost two to three times more than the original price. This is why most customers prefer refurbished cars that are low in price but have considerably better quality. Even the spare parts of such vehicles are affordable and are relatively simple.
Local production scenario
The automotive industry in Bangladesh has witnessed some significant developments, with companies such as IFAD Autos PLC leading the way and others contributing to the growing industry. Bangladesh has marked a new chapter in this industry as IFAD Autos PLC has exported locally manufactured air-conditioned buses to Bhutan for the first time. These buses were manufactured at its facility, the largest commercial vehicle manufacturing plant under the country’s private initiative.
Eleven Ashok Leyland buses were sent in the first batch, setting a historic precedent. Countries such as Nepal, Myanmar, the Maldives, and the Northeastern states of India have also expressed interest in purchasing such vehicles in the near future.
Pragati Industries Limited is a state-owned entity in Bangladesh that has assembled over 50,000 vehicles, including cars, buses, jeeps, trucks, tractors, pickups, ambulances, etc., since its inception in 1966. Navana Limited mainly distributes Toyota and Hino vehicles. Mitsubishi, Suzuki, and Tata vehicles are predominantly assembled and distributed by Uttara Motors Limited, Nitol-Niloy Group, and Rangs Limited.
On the other hand, the automobile giant Mitsubishi Motors plans to establish a manufacturing plant in Bangladesh by 2025. It is speculated that this would make Mitsubishi cars more affordable for Bangladeshi consumers.
Since the last few years, local entrepreneurs have collaborated with foreign companies, including Hino, Mitsubishi, Tata Motors, Ashok Leyland, and so on, to progress further with assembling and manufacturing cars, buses, and trucks in a limited capacity. Truck sales have increased recently due to the boom in economic activities. Support from the garment and cement industries, easy financing, and lower taxes have accelerated these increased sales in this country.
In recent times, the Bangladeshi car market has also been diversifying. For instance, Rancon Cars Limited and Proton Holdings launched two variants of Proton X90 hybrid vehicles in early 2024, and they are planning to start producing Proton vehicles locally so that the retail prices of these cars can be reduced significantly. Rancon also promises to provide a warranty of five years or coverage of 150,000 kilometers. Other companies like Walton and Runner are also working to manufacture different types of vehicles locally.
Bangladesh’s automotive industry is at its crucial juncture, balancing the reliance on imported reconditioned vehicles and expanding emerging local assembling and manufacturing initiatives. Recent successes in the export sector of locally manufactured vehicles only make us even more hopeful about an automotive industry boom.
Jinat Jahan Khan is currently working as a Research Associate at BRAC James P Grant School of Public Health. She mainly focuses on research in public health, gender-based and poverty-related issues. She has over two years of research experience and previously worked in newspapers and magazines for seven years.
