Mitsubishi Motors yesterday signed a memorandum of understanding (MoU) to conduct a feasibility study on establishing a production unit in Bangladesh by 2025 as the Japanese multinational automotive manufacturer looks to expand its footprint in South Asia.

This deal, which government officials have dubbed a big step forward, comes at a time when the domestic passenger car market is gradually expanding thanks to steady economic growth and an increased spending capacity of the middle class.

The current market size for personal vehicles, both old and new, stands at Tk 5,000 crore and is growing by about 12 per cent annually, according to industry insiders.

“This feasibility study is the beginning of our new journey and if all goes well, we will be able to set up a Mitsubishi car manufacturing plant in Bangladesh,” said Md Shahidul Hoque Bhuia, chairman of the Bangladesh Steel and Engineering Corporation (BSEC).

The feasibility study will be completed in December, he added.

Bhuia and Kurahashi Masatsugu, division general manager for the European Union, Middle East, Africa and South Asia at Mitsubishi Motors, signed the MoU on behalf of their respective parties, setting principles and assumptions to conduct a study on the opportunity of setting up a joint venture by 2025.

The new plant will cater to the country’s growing demand for personal vehicles by expanding local knockdown production.

The plant’s capacity, the amount of investment, and which models will be made at the proposed unit will be determined based on the Bangladesh government’s support and incentives, reports Nikkei Asia.

At present, state-run Pragati Industries, a concern of the BSEC, assembles select models of Mitsubishi cars at its plant in Chattogram.

Similarly, Rangs, a concern of Rangs Group, locally assembles Mitsubishi Outlander.

However, Mitsubishi currently has no plants in Bangladesh where it holds an ownership stake.

In fiscal 2020-21, Mitsubishi sold 1,700 vehicles and saw 200 assembled in the country.

There is currently limited demand for new cars in Bangladesh, where most people buy second hand ones, but Mitsubishi holds the biggest share of new car sales in the country, Nikkei Asia added.

“This is a historic moment,” said Ito Naoki, Japan’s ambassador to Bangladesh.

Bangladesh and Japan have a longstanding and excellent bilateral relationship.

As such, Japan is considered a vital development partner for the country, Naoki said while virtually attending the signing ceremony.

Industries Minister Nurul Majid Mahmud Humayun said the government was working for the industrialisation and development of the local automobile industry.

Besides, in order to help the country reach the highest level of development, the government provides all kinds of support to foreign investors to expedite the country’s industrialisation, he added.

Other local companies that assemble foreign cars in Bangladesh include, PHP Motors, a concern of the PHP family, which assembles models of Malaysian brand, Proton.

Earlier this year, Fair Technology, local distributor of Hyundai Motor Company, said it was going to establish a plant to assemble the South Korean automaker’s models.

Kamal Ahmed Mojumder, state minister for the Ministry of Industries, and Zakia Sultana, secretary, were present at the event held on the ministry premises.

Shahabuddin Ahmed, Bangladesh’s ambassador to Japan, also virtually joined the event.