Economics of Autorickshaws: What Drives Their Crazy Demand?

On Thursday (November 21), Dhaka came to a standstill again. This time, autorickshaw drivers staged protests across the capital.

This comes after the High Court ordered a stop to plying battery-operated auto-rickshaws on the streets of the Dhaka Metropolitan Region. The order was issued after hearing the petition on November 19.

This is not the first time that autorickshaws have been banned. Despite several previous efforts by two Dhaka city corporations, these illegal three-wheelers continue to dominate the streets.

The number of autorickshaws has increased significantly over the past few years, flooding not only Dhaka but also other parts of Bangladesh.

Today there are up to four million autorickshaws in the country.

What’s behind this crazy demand? To answer this question, we need to understand the basic economics of autorickshaws.

Less than 2% of registered vehicles in Bangladesh are public transport such as buses and minibuses. The gap between supply and demand for public transport is responsible for the boom in these unsafe three-wheelers.

Meanwhile, keeping pace with inflation, the fares of traditional pedal rickshaws have also skyrocketed. Hence, people often choose auto-rickshaws as they are available at cheaper rates.

In economics, this is called the substitution effect—consumers switch to cheaper options.

As a result, this has put pedal rickshaw tractors in tough competition. Many of them have even switched to motorized autorickshaws by installing batteries.

Back in 2004, fully assembled autorickshaws were imported from China, but now they are assembled locally. In most cases, regular pedal rickshaws are simply equipped with imported batteries.

The cost of manufacturing a new autorickshaw in Dhaka can range from Tk 60,000 to over Tk 80,000.

The autorickshaw has four 12-volt batteries, along with a motor, switch, lights and other components. The cost of this battery pack is about 30,000 tenge, the service life is from 6 months to 1 year. However, after 6 months you can return the battery for almost half the cost.

“We pay the vehicle owner Tk 350 per day. Although it depends on the usage, it usually requires around Tk 50 per day to charge. This means the monthly charging cost is Tk 1,500,” said Dr Waheed Islam, a 52-year-old man. old autorickshaw driver in Shahbagh.

In comparison, a traditional pedal rickshaw costs less than Tk 35,000 to build. Moreover, the daily garage rental fee is less and is only Tk 100 to 150. And obviously it doesn’t require charging costs.

So why do rickshaw drivers still prefer auto rickshaw over traditional pedal rickshaw?

The answer is simple. Due to higher and faster return on investment.

Ali Hossain, a rickshaw maker with nearly 40 years of experience, shared his thoughts on the changing trends in his business: “I no longer do pedal rickshaws because it is not profitable. Nowadays, passengers are always in a hurry and prefer auto-rickshaws to pedal ones. “

Autorickshaw drivers require no physical effort, reach their destination quickly and can afford to charge lower fares. This allows them to carry many more passengers throughout the day compared to pedal rickshaws.

“On average, we can earn about Tk35,000 or more per month,” said Md Islam, an autorickshaw driver.

On the other hand, pedal rickshaw drivers can only earn around Tk 15,000-20,000. On some days they earn nothing at all, because due to the enormous physical labor they often get sick.

Millions of rickshaw drivers depend on autorickshaw driving for their livelihood.

Prof Md Shamsul Hoque, director of the Accident Research Institute (ARI) of Bangladesh University of Engineering and Technology (BUET), says the theory of profit maximization applies here. Economics says that the main goal of business is to maximize profits.

“The main motivators of rickshaw drivers are garage and rickshaw owners as they can charge higher fares and make more profit from auto-rickshaws,” he said.

However, there are various problems with these autorickshaws. First of all, the most important issue is safety. This is due to their technical malfunctions and uncontrolled movement on the streets.

Sources from the Bangladesh Road Transport Authority (BRTA) noted that rickshaws, vans and similar battery-powered three-wheelers are worsening the road safety situation in Dhaka city.

The evidence is in sight. Just a few days ago, a first-year Jahangirnagar University student named Afsana Karim Rachi died in a rickshaw accident on her own campus, sparking protests among students.

According to ARI, between January and October this year, there were 900 accidents involving battery-powered rickshaws across the country. Among them, 582 were severe.

“Small vehicles are the leading cause of road accidents. Public transport should be optimized as much as possible and small vehicles should be controlled,” Prof Hoque told The Business Standard.

If the road structure is poorly planned, accidents are inevitable, he said. There is basic science behind urban road planning.

Priority should be given to pedestrians to ensure footpaths are wide and usable, he said. Public transport should be the next priority. Finally, small vehicles like auto-rickshaws and CNGs should have separate lanes.

Apart from safety concerns, autorickshaws also put a strain on the national power grid as they are charged by electricity.

Using 48-60 amp chargers, it takes 7 to 8 hours to fully charge an autorickshaw. They also pose a threat to the environment due to the lack of a proper disposal system for expired batteries.

However, banning these vehicles outright is not the best option, says Professor Hoke. Existing drivers must be given time to switch to alternative livelihoods, otherwise they will continue such protests.

“To deal with flood waters, we first close the floodgates. Likewise, to control auto-rickshaws, we need to first stop importing them and their batteries,” he concluded.