Manufacturing EV: Runner to cut loan burden to make its revamp plan a success

Runner Automobiles has planned to cut down its short- and long-term loan burden by expanding its equity and focus on manufacturing electric vehicles to turn the losing concern into a profit-making business.

Chairman of Runner Group Hafizur Rahman Khan revealed the company's goal and expectations recently as he spoke at length with the FE correspondent.

"It's difficult to make a company's operations profitable amid the growing interest rates," Mr Khan said.

The finance cost of a bank loan worth Tk 500 stood at Tk 45 at an interest rate of 9 per cent. When the rate jumps to 12 per cent, the finance cost for Tk 400 comes to Tk 48, higher than the cost borne for a loan of Tk 500.

"So, it would be convenient for us to slash the amount of bank loans to bring down finance costs."

Runner Automobiles has been incurring losses since FY21 because of currency depreciation. In FY23, it endured a loss of Tk 879 million, having dealt with Tk 1.42 billion worth of consolidated finance expenses.

Runner Automobiles' outstanding loans amounted to more than Tk 13 billion as of FY23, which led to a finance cost as big as 21 per cent of its consolidated revenue in the year.

Against the backdrop of persistent interest rate hikes by the Bangladesh Bank, the company has decided to ease the burden so that it can shift its focus to the revamp of its manufacturing line.

The chairman said the company would gradually move its production to electric vehicles from fuel-run ones.

"Our target is to be the pioneer of electric two, three and four wheelers."

An electric biker will have a spending of Tk 0.14 per kilometer, with a sharp transport cost decline from Tk 3,000-4,000 a month for a fuel-run bike to Tk 300 per month.

Cost reduction strategy

The board of directors of the company considers issuing preference shares to raise funds for equity injection.

"We can even sell some assets for the fund required for repaying bank loans," Mr Khan said.

Efforts are underway to cut operating costs, for example transport cost.

"The overhead costs will not decline significantly because of the company's humanitarian approach," the company chief said without elaborating on that.

Pioneering electric vehicle manufacturing

Runner Automobiles has been conducting test runs of its electric two wheelers and has received feedback from customers.

Having approval of the Bangladesh Road Transport Authority (BRTA), the company now sells 100 electric two wheelers per month.

Mr Khan looks forward to a boost to the sale of electric two wheelers to 500 per month after a formal inauguration ceremony of the product to be held after Ramadan this year.

Towards sustainable production

Runner Automobiles collected Tk 2.65 billion, issuing sustainability bonds last year for building a rooftop solar plant for its three-wheeler manufacturing plant and working capital.

The solar plant is about to be completed, partially funded by the bond money. The three-wheeler plant is likely to begin operations within a few months.

The annual coupon rate of the bonds ranges between 8.5 per cent and 9 per cent, with a seven-year maturity period.

The chairman said bond had been preferred as means to get funds as it involved a lower repayment rate than the bank rate.

The low cost of investments will help the company to see good profits in the days to come, Mr Khan said.

Though electric bikes would cause less carbon emission than fuel-run motorcycles, the head of the company admitted that the manufacturing procedure is not eco-friendly.

"There are [greenhouse gas] emissions in welding and painting. It will not be wise to say that the manufacturing process is eco-friendly.

"We are in a process to reduce carbon emissions. But it's difficult to say how much emission has been cut."

Mr Khan, however, assured that his organisation had been recycling solid waste and purifying water before discharging into the nearby pond.

"And the solar plant will help reduce emissions," he boasted.

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