The FY27 budget proposes a reduction in import duty on completely built-up (CBU) plug-in hybrid electric vehicles (PHEVs), while no corresponding tariff adjustments have been proposed for components used in local production and assembly. The situation has prompted industry representatives in Bangladesh to seek tariff support for domestic manufacturers.

The Bangladesh Automobile Assemblers and Manufacturers Association (BAAMA) raised the issue in a letter to the Chairman of the National Board of Revenue (NBR), stating that manufacturers import hundreds of parts under different tariff codes and are subject to taxes at multiple levels.

For example, wheels and certain other components are imported under HS Code 8708700. The applicable customs duty on these imports is 25%, while the regulatory duty is 15%, value-added tax (VAT) is 15%, advanced income tax (AIT) is 7.5%, and advanced tax (AT) is 5%.

As a result, the aggregate tariff on goods imported under this code stands at 67.5%. Other imported PHEV components are subject to taxes exceeding 60%. Although the tax on vehicle components remains between 5.94 and more than 10 percentage points lower than the tax imposed on imported fully built PHEVs under the FY27 budget, local manufacturers have stated that the current structure could affect the competitiveness of domestic production and influence future employment generation.

Aminur Rahman, Head of Corporate Affairs at Runner Group, outlined the challenges faced by local manufacturers compared with PHEV importers.

He stated that PHEV manufacturers require substantial investment, with financing needs typically met through bank loans. In contrast, importers do not require comparable levels of investment. According to Rahman, importers may be able to offer hybrid vehicles at lower prices following the reduction in import duties, while manufacturers that have financed investments through bank credit may have limited scope to reduce selling prices.

"Ultimately, it will create an unfair situation that discourages the manufacturing of CBU plug-in hybrid vehicles," Rahman said.

In its letter to the NBR Chairman, BAAMA stated that the use of hybrid passenger vehicles has been increasing rapidly across the country.

"If incentives are offered for establishing local passenger Plug-in Hybrid Vehicle (PHEV) manufacturing industries, both domestic and foreign investors will be encouraged to establish factories, creating a favourable environment for new employment opportunities," the association stated.

BAAMA also noted that, under the current duty structure, no corresponding incentives or duty benefits have been provided at any stage of PHEV production, assembly, or local value addition.

"It is a matter of concern for the development of the country's automobile industry," the letter stated.

Rahman added that manufacturers of plug-in hybrid vehicles are seeking policy support and tariff benefits linked to industrial development and employment generation.

According to BAAMA, manufacturers are satisfied with the budgetary support offered for electric vehicle (EV) production and assembly. Companies involved in body building, welding, painting, and EV assembly are expected to benefit from reduced import taxes on raw materials and components under the proposed budget.

For high-value-added production activities, including full assembly, welding, painting, and body building, almost all duties and taxes have been exempted, with only a 3% customs duty applicable to imported raw materials and components. For lower-value-added assembly operations, duties and taxes have been exempted, except for a 15% import duty on components.