The overall performance of the automobile industry was remarkable until recently dollar shortage in the Balance of Payment pushed the government of Bangladesh to shut off the letter of credit(LC) issued by banks. As a result, the business of automobile companies has become less profitable. The cost of import has increased in the absence of LC. Therefore, providing customers with authentic products from foreign business partners has become challenging.
The situation might force some of the companies to shut down their businesses. With the loss of repeat customers, the profit margin will decrease. As a result, businesses may suffer a downfall in the future.
After manufacturing auto components, sending them to local customers on time in Dhaka and other cities becomes challenging. Political instability, the recent pandemic, increased fuel prices, and costs of factors of production are all potential obstacles on this journey. Some other causes, for example, proper quality assurance, current vehicle demand, fixed and variable costs, and ineffective logistic planning, have been responsible for the inefficiency in the supply chain management of the automobile industry in Bangladesh.
Assuring quality and good working order in production ensures customer satisfaction. Walton is one of the first motorcycle manufacturers in Bangladesh. They have consistently brought quality products to their customers and even marketed them outside Bangladesh. Aftab Automobiles Ltd. has also successfully assembled Toyota and Hino vehicles for Bangladesh for a long time. Hanif Paribahan is one good example of a Hino vehicle in Bangladesh.
The demand for the vehicle is influenced highly by consumer trends and preferences. The increased tax rate on automobiles, rise in fuel price, and higher interest rate on private vehicle financing are all responsible for a decline in car customers in Bangladesh. The Sales of automobiles declined to their lowest in 7 years due to covid-19 pandemic.
The amount of tax for vehicles with engines under 1600 CC is 127.16 per cent, 212.20 per cent for engines with engines between 1600 CC and 2000 CC, and for automobiles with engines between 2000 CC and 3000 CC is 442.60 per cent. A decrease in demand for vehicles causes a decline in the supply of factors of production by the producers.
The automobile supply chain management of the domestic market needs proper logistics planning. Logistics is responsible for the entire operation, from receiving client orders to handing them over to them. Failure to arrive on time can result in dissatisfied customers. The top automobile companies in Bangladesh carry better logistics planning than the rest, displayed by their market performance. Factors of production, workers, suppliers, and shipping are the basic fixed and variable costs carried out by almost all automobile manufacturers.
The scarcity of land is another issue for business companies in Bangladesh. When automobile companies lack enough warehouse or storage space, they can hire third-party land providers. The 3rd party companies lease their spaces to businesses to store their parts, products, or materials for later use. It frees up valuable floor space for the business. These services are particularly needed in dense urban centres like Dhaka, Gazipur, and Savar, where land is costly.
For a long-term solution in the supply chain sector, the automobile companies in Bangladesh have to look for a better management plan. Carmakers in Bangladesh can work with local suppliers to shorten supply lines and reduce dependency on foreign materials. It will not only grow import substitution industries but will also become less environmentally hazardous.
