Covid leaves CEAT tyre plant in limbo

Indian tyre maker CEAT is unlikely to follow through on its plans to build a manufacturing unit in Bangladesh, apparently at least until the economy fully recovers from the coronavirus pandemic-induced shocks.

"The project was put on hold after Covid-19 emerged in March last year," said Shahadat Hossain Chowdhury, chief financial officer and company secretary of CEAT AK Khan Ltd.

"It remains uncertain when we can start the implementation process considering the current situation," he told The Daily Star recently.

CEAT AK Khan Ltd is a joint venture company of CEAT Ltd, the flagship company of Mumbai-based RPG Group, and Chattogram-based AK Khan & Company Ltd.

Established in 1956, CEAT's Indian production capacity is of over 95,000 tyres per day.

CEAT first announced plans to build a factory in Bangladesh in 2013 but the project was delayed by about five years due to land-related complications.

Then the two conglomerates inked an agreement back in February 2017 to establish a tyre plant on 28 acres of land in Bhaluka upazila of Mymensingh with an initial investment of $67 million.

CEAT was to bear 70 per cent of this expense, while AK Khan would provide the rest. But the implementation has been postponed indefinitely as the situation centring the pandemic is yet to reach a suitable stage for investment, Chowdhury said.

CEAT aims to become a market leader in the local tyre market, where current sales amount to about Tk 5,000 crore, up from Tk 4,000 crore in 2017 and Tk 3,000 crore in 2015.

According to market players, the commercial vehicle tyre segment dominates the domestic industry with a total market share of about Tk 3,750 crore.

Bangladesh imports tyres for commercial use from India, Indonesia, South Korea, Thailand, and China.

Around 1.75 lakh tyres are sold for commercial use in the country each year, and the figure has been growing steadily for the past decade or so.

CEAT had planned to provide its customers in Bangladesh with tyres at lower costs by manufacturing them in the country. Once the joint venture plant begins production, it could reduce tyre prices by 25 per cent to 30 per cent.

The company plans to manufacture crossply tyres for trucks, light and small commercial vehicles, and two-wheelers for the local market.

"Customers will continue to be deprived of this benefit until the project is complete. So, the domestic commercial tyre segment will be import-dependent," Chowdhury said.