Over 85 percent of the country’s estimated Tk700 crore annual market for automotive filters is served by importers
Atlas Bangladesh Limited, the state-owned two-wheeler manufacturer, on Tuesday opened its new motorcycle assembly line on its premises in Tongi to assemble TVS motorcycles under a five-year corporate agreement.
To transform the cooperation into a long-term partnership, TVS Motor Company and Atlas Bangladesh Limited are in talks for a joint venture that will aim at capturing a major portion of the local market for high-quality automotive filters – including fuel, engine oil and air filters.
Currently, over 85 percent of the country's estimated Tk700 crore annual market for automotive filters is served by importers while locally manufactured filters are primarily basic, low-end ones made of foam.
Modern, world-class paper filters for all classes of vehicles, generators and air-conditioners will be made locally too if the planned joint venture materialises. It may be a good starting point for the desired self-sufficiency in manufacturing two-wheeler components.
Atlas officials informed Industries Minister Nurul Majid Mahmud Humayun and State Minister Kamal Ahmed Mojumder of this plan at the new assembly line inauguration event.
However, they declined to respond to further queries by The Business Standard.
"This is because there is no concrete development yet," said Sanjay Kumar Datta, company secretary of Atlas.
"If there is any further development, we will officially announce it," he added.
Sources at the Bangladesh Steel and Engineering Corporation, Atlas' mother organisation, hinted that the joint venture may need initial capital of Tk10 crore and may grow.
Atlas' fall and struggle
Atlas lost its business – assembling and marketing Japanese brand Honda and Indian brand Hero Honda motorcycles – in 2013, after Hero and Honda ended their joint venture in India.
The same year, in Bangladesh, Honda started a new joint venture with the Bangladesh Steel and Engineering Corporation while Hero preferred collaborating with the Nitol Niloy Group.
Atlas, a publicly listed company, started to fall from its position as second largest on the country's motorcycle market.
It tried to assemble and sell Zongshen motorbikes, a popular brand in China, but failed to gain momentum.
Annual motorcycle sales plummeted to less than 1,500 units in 2017 from more than 50,000 five years prior. Once a blue-chip company on the Dhaka Stock Exchange, Atlas posted consecutive losses until the last fiscal year.
Its workers have not received any profit bonus since its business began to fall. Before that, they had enjoyed up to four-to-five times their basic salaries in profit bonuses each year.
Hope with TVS brand
With renewed focus, Atlas, in February last year, entered a five-year corporate partnership agreement with TVS Auto Bangladesh Limited to assemble TVS motorcycles at the Atlas plant and sell them on its protected corporate market.
According to public procurement rules, government organisations, projects and government-funded non-governmental organisations are Atlas' exclusive customers.
On the other hand, TVS Auto Bangladesh Limited – a decade-old joint venture between Indian TVS and Sons, and Bangladeshi Rian Motors – is the second-largest player on Bangladesh's motorbike market.
With an annual production capacity of over 1.4 lakh motorcycles at its Tongi plant and over 200 dealers across the country, TVS already grabbed 24 percent of the market share in Bangladesh. This is due to its status as the fastest-growing brand over the last couple of years.
The arrangement between Atlas and TVS outlines that neither of them should target the other's customer base even though they are selling the same motorcycle in Bangladesh. Atlas also secured an agreement with TVS that allowed it to work as a contract assembler of TVS bikes to be sold by TVS Auto Bangladesh Limited.
Atlas will keep assembling a reasonable number of TVS motorcycles and the surplus assembled units – which they are unable to sell – will be returned to TVS. TVS will sell them through their wide distribution and retail channels.
"We will charge TVS a fee for the assembly service. I am hopeful that the new modern line that we built to assemble TVS motorcycles will not take more than two years to pay back the invested capital of Tk3.64 crore," said ANM Kamrul Islam, managing director of Atlas.
"Thanks to TVS for joining hands with us. The brand is getting more response on the market. That is why we have built the new assembly line in line with TVS standards," he explained.
Kamrul is hopeful that the increase in their own sales and income from assembly fees will help Atlas become profitable during this fiscal year. "In the worst-case scenario, it will happen next year."
"And, gradually, we will look for diversified sources of income from different businesses which may help workers and shareholders achieve their old glory," said the managing director.
A proposal to build a manufacturing plant for energy-efficient and long-lasting electric ceiling fans, on the company's land, is under government consideration, the company said in its latest annual report. The plot for the proposed plant is located next to the company's Tongi factory.
The report also mentioned the plan for a filter manufacturing joint venture with TVS.
Industries Ministry sources told The Business Standard that the proposed ceiling fan plant with an annual capacity of two lakh units will need an investment of over Tk30 crore.
Without floating a new subsidiary, the company will expand to explore business opportunities.
In 1966, Atlas started its journey as a venture of the privately-owned Siraji Group in technical collaboration with Japan's Honda company. After Bangladesh's independence, it was nationalised.
In 1988, the government shared minority ownership of the company with general stock market investors.