Japan eyes Bangladesh as a place to make cars

JETRO Bangladesh chief says part of the potential $6.35 billion Japanese investment could fund auto and parts production, starting with local assembly

Japanese companies could invest in manufacturing cars and parts in Bangladesh for the local market, which currently relies entirely on imports for Japanese brands such as Toyota, Honda and Nissan.

Ahead of Prime Minister Tarique Rahman’s visit to Japan on October 26, and amid reports of $6.35 billion in potential Japanese private investment, Kazuiki Kataoka, country representative of the Japan External Trade Organization (JETRO) in Bangladesh, said vehicle manufacturing could become an important area for Japanese investors.

Bangladesh would, however, need to begin by assembling vehicles using imported components before moving towards full-scale manufacturing.

“Building a competitive industry would require stronger local supply chains and access to high-quality steel,” Kazuiki said.

He identified steel quality as a major constraint, adding that the automotive industry would eventually need stronger domestic capabilities in steel, chemicals and precision engineering. 

“Without these, local assembly could create jobs and technical expertise, but much of the value generated by manufacturing would remain dependent on imports,” he added.

Reports that Japan is preparing to facilitate ¥1 trillion, or about $6.35 billion, in private-sector investment in Bangladesh over five years come as the island nation looks to deepen industrial ties with Bangladesh under Tokyo’s “China Plus One” policy.

Over the past decade, trade between the two countries has grown steadily due mainly to rising demand for competitively priced Bangladeshi garments in Japan. Bangladesh’s exports to the Japanese market have more than tripled during this period.

Recently, senior executives from three major Japanese companies, Toyota, Mitsui and Marubeni, have visited Bangladesh and met top government officials. Representatives of Marubeni and Toyota have discussed investment opportunities.

In February this year, Japan and Bangladesh signed an economic partnership agreement. Bangladesh has relatively low labour costs and a favourable environment for manufacturing. With a population of about 170 million, it is the world’s eighth-most populous country and offers a large consumer market with a sizable young population.

On the eve of the prime minister’s visit, Kazuiki said Toyota Tsusho Corporation is planning to invest $40 million in two sales, servicing and spare-parts centres in Dhaka and Chattogram, with construction scheduled to begin in November 2026.

Separately, he said the company is planning a hybrid electric vehicle manufacturing facility in the National Special Economic Zone. Development is expected to begin in 2027, with full-scale production targeted for 2029.

The service centres in Dhaka and Chattogram would strengthen Toyota’s sales and after-sales network, while the proposed plant could provide a base for local vehicle production.

However, Kazuiki said the plant’s investment value, capacity, location and model line-up have not yet been finalised.

ENERGY COULD ATTRACT MORE INVESTMENT THAN CARS

Prime Minister Tarique Rahman will visit Japan from October 26 to 29. During the stay, he will hold a meeting and lunch with Japanese Prime Minister Takaichi Sanae. The visit is expected to provide an opportunity to advance economic cooperation alongside efforts to strengthen strategic ties.

Kazuiki said the potential $6.35 billion in Japanese investment reflects the interests and plans of Japanese companies, especially those already operating in Bangladesh.

He said energy infrastructure could attract even more investment than the auto sector.

Bangladesh’s energy shortages, particularly liquefied natural gas (LNG), could create opportunities for Japanese companies to expand their operations, Kazuiki said.

JERA, Japan’s largest power generation company, already runs an LNG-based power plant in Meghnaghat and is interested in energy supply and other energy-related businesses in Bangladesh, he said.

Kazuiki said the proposed Matarbari deep-sea port in Cox’s Bazar could offer another avenue for investment. 

The port is being developed with support from the Japan International Cooperation Agency (JICA). The construction is expected to be completed around 2030.

Kazuiki said energy-related businesses, including an LNG terminal, could form part of those operations, although specific investment decisions have yet to be finalised.

‘BANGLADESH MUST OFFER POLICY PREDICTABILITY’

Kazuiki said low labour costs alone will not secure long-term industrial investment as wages rise. Manufacturers need predictable regulations, reliable energy supplies, efficient customs clearance, access to foreign exchange and the ability to repatriate profits.

Tareq Rafi Bhuiyan (Jun), immediate past president of the Japan-Bangladesh Chamber of Commerce and Industry (JBCCI), said manufacturing, particularly automobiles and components, electrical appliances and light engineering, could attract significant Japanese investment, alongside energy and logistics.

Higher-value textiles, agro-processing and healthcare also offered promising opportunities, he said. 

“The proposed $6.35 billion investment over five years is achievable if Bangladesh ensured policy stability, reliable utilities and commercially viable projects.”

Tareq said uncertainty over tax and customs rules, slow approvals, unreliable energy supplies, and difficulties with foreign exchange and profit repatriation weaken Bangladesh’s competitiveness.

“Japanese investors need predictability,” he said.

To compete with Vietnam and Thailand, Bangladesh must offer reliable infrastructure and efficient administration alongside competitive costs, he added.

Tareq called for a joint Bangladesh-Japan mechanism with named investors, commercially viable projects and clear deadlines for approvals, land, utilities and financing.