Impact of locally assembled cars on the brand-new vehicle market of Bangladesh

Abstract

Bangladesh’s automobile market has traditionally been dominated by reconditioned Japanese cars, as the import duty structure makes them significantly cheaper than brand new cars. However, this has been changing recently as more and more people move towards brand-new official vehicles. However, in the market of brand-new vehicles, a major shift has occurred over the past three years. The rise of locally assembled vehicles, or KD vehicles, has taken over the market, with brands like Hyundai, Mitsubishi and Proton gaining considerable market share due to reduced prices made possible by KD assembly. Government policies regarding such, such as lower duty rates, tax reductions, etc., further incentivizes brands to shift to KD assembly. The study employs both qualitative analysis using interviews with industry insiders, and quantitative analysis using BRTA registration data (2019–2025). The findings reveal a steady rise in KD vehicle sales in the brand-new segment, with Hyundai and Mitsubishi emerging as market leaders. However, holistic market analysis shows that it is not KD itself, but the price advantage created by KD that is causing more customers to lean in this direction. That being said, KD assembly is the method by which most price reductions are made possible. DHS Motors Limited, as the official distributor of Honda and GAC in Bangladesh, faces several strategic challenges in a highly price-sensitive market, leading to a reduction in market share. The report recommends that DHS enter into KD assembly for all three brands under the DHS umbrella. With access to the Rancon Group’s facilities, namely the automobile assembly factory at Rancon Auto Industries Limited, DHS is well-positioned to enter the KD space and regain market relevance. Overall, the conclusion of the report is that KD assembly is the future of the Bangladeshi automotive industry.