Bikes For Bengalis: Japan’s Honda (NYSE: HMC) Operating Motorcycle Plant In Bangladesh

Japan has opened a new motorcycle assembly plant in Bangladesh which is expected to provide jobs for an economy reeling from months of turmoil, according to a report in Khabar South Asia news agency. The Honda Motor Co Ltd. (NYSE:HMC) factory/assembly plant opened in December in Gazipur, near the capital city of Dhaka and is expected to reduce Bangladesh’s reliance on motorcycle imports. Honda coughed up 70 percent of the 610 million Taka ($7.8 million) investment for the plant, with the remaining 30 percent paid for by the Bangladesh Steel and Engineering Corp. (BSEC).

Bangladesh Honda Private Ltd. (BHL), Honda's motorcycle business joint venture in Bangladesh, said it plans to assemble 10,000 CD-80 motorcycles in the first year of operation, and then increase production gradually. (The plant has an annual capacity of 80,000 cycles). "This [plant in Gazipur] is also going to create new job opportunities and help ease the prevailing chronic unemployment situation," BSEC director Mobarak Ali told Khabar.

Plant operators at Gazipur eventually plan to manufacture entire motorcycles within a few years after expanding its distribution and marketing facilities across the country. At the moment, the company has only two distributors, in the towns of Jamalpur and Tangail. "Our aim is to produce cheaper, efficient motorcycles and make it affordable to a larger segment of the population. It's a huge market," BHL’s managing director Yoichi Mizutani told Khabar.

The CD-80 model gets 80 kilometers-per-liter and is priced at 11,000 Taka (about $142), which costs less than an imported motorcycle. "This [CD-80] is an amazing motorcycle – very fuel- efficient and less harmful to the environment," Siddiqur Rahman, an employee at Dhaka University, told Khabar. Golam Rabbani, the owner of Rupali Motors and a dealer in Jamalpur, said the demand for motorcycles in Bangladesh is growing “substantially” every year. “The reputation of Honda as being durable, fuel-efficient and sturdy is a big plus for us to market the product," he said. The Bangladesh Road Transport Authority (BRTA) stated that 200,000 motorcycles were sold in the country in 2012, while demand has been climbing by 22 percent annually.

Some Bangladeshis hope that Japan’s decision to pour money into a plant in the impoverished country sends a strong signal to other potential investors. "It's a matter of great hope and I'm sure Bangladesh's image as a prospective destination for foreign investment will be further improved with Honda's entry," Mohammad Taslim, an economics professor at Dhaka University, told Khabar, adding that Honda will provide Bangladesh will its expertise in manufacturing, management and technological innovation. "That's how countries like India and China have developed their manufacturing base," he added.

Japan, still one of the wealthiest nations in Asia despite its long period economic malaise, has been increasing its trade and economic ties with Bangladesh, one of the poorest states on the continent. According to the Japanese embassy in Dhaka, 176 Japanese companies are now doing business in Bangladesh as of December 2013, more than doubling in just five years. Meanwhile, Bangladeshi exports to Japan have jumped by 2.5 times between 2009 and 2013 – while the export of Bangladeshi apparel and garments have surged by 20 times over that period.

Japan is also one of Bangladesh’s largest foreign aid and development sources, having invested billions of dollars into the country.