Ford is First to Enter Burma’s Growing, Volatile Car Market

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Ford Motor Company announced on Tuesday that it will open an official dealership in Rangoon this year, becoming the first international carmaker to distribute new vehicles on the Burmese market, which until recently remained closed off due to international sanctions.

Ford executives said Burma’s auto market, although still small, holds great promise for future sales of Ford passenger cars, SUVs and transport vehicles.

Official import figures show that the country’s car sales have grown rapidly since 2011, perhaps by more than 50 percent.

According to analysts and local car dealers, however, demand is volatile and most consumers prefer second-hand Japanese vehicles. They say that it remains to be seen how strong Burmese demand for the more expensive new Ford cars will be.

Ford executives said Burma offered a new Asian growth market located in an economically vibrant region. “Ford is aggressively expanding its operations in Asia Pacific and Asean. And we saw a great opportunity to expand here in Myanmar,” said Dave Westerman, Asia Pacific regional manager at Ford Export and Growth Operations.

“Ford Motor Company will become the first global automaker to provide automotive solutions in Myanmar,” he said at a press conference at Rangoon’s Inya Lake Hotel on Tuesday.

Capital Automotive Group has been contracted to open a Ford facility, comprising a showroom, service center and spare parts warehouse, on Rangoon’s Insein Road in Hlaing Township by the end of this year. The group is a joint venture between Bangkok-based RMA Group and Capital Diamond Star Group, a conglomerate owned by Burmese businessman Ko Ko Gyi.

The facility will employ 40 people who will be trained in sales and servicing of Ford cars, said Martyn Dawson of Capital Automotive, adding that sales prices have not yet been set as the firm was still conducting market research.

The Associated Press reports that the facility could open as early as August.

Westerman said he was confident that brand-new Ford vehicles would be in demand among Burmese customers, although he stopped short of giving an estimate of how many vehicles Ford could sell here. He added that it was too early to consider investment in car manufacturing and assembling in Burma.

“A lot of cars on the roads here are 10, 20 years old, and have no customer warranty, no service,” Westerman said, while Ford would offer “a high-quality product and service, and gain a high level of customer satisfaction—this is a critical component of what we bring to Myanmar.”

Ford is among a group of American companies, including GE, PepsiCo, Coca-Cola and Google, which have announced plans to enter Burma after the US government suspended economic sanctions against the country last year following its transition from a military regime to the current quasi-civilian government.

“We took a lead off the American government and their call for American businesses to invest here in Myanmar. And we appreciate the support offered by the American government,” said Westerman, who was flanked at the press conference by US Ambassador Derek Mitchell.

Other international car makers are also eyeing the Burmese market. Suzuki Motor Corp. announced in October last year that it plans to build a factory in Burma by 2015 which would produce 20,000 to 30,000 cars annually. Mitsubishi Motors said in January that it will open three after-sales service centers, while Toyota is reportedly studying vehicle manufacturing in Burma.

For now, though, the market is dominated by second-hand car imports from Japan, which surged after restrictions on the trade were lifted in October 2011 as part of government reforms. Before, only the Union of Myanmar Economic Holdings Ltd, a military-owned conglomerate, could import cars.

“Between October 2011 and April 24, 2013, a total of 160,431 cars were imported into Myanmar,” Thein Myint Wai, an assistant director at the Ministry of Commerce wrote in an email.

Eric Heymann, a senior economist at Deutsche Bank who has researched the Asean auto market, told The Irrawaddy that only 280,000 passenger cars were registered in Burma in late 2010, suggesting a 57 percent increase in the number of vehicles over a one-and-a-half year period.

The car market in the impoverished country of about 60 million people is set for a long period of growth, Heymann said, as it had less than 10 passenger cars per 1,000 inhabitants, compared to an average of 50 for Asian countries.

A company like Ford would nonetheless have to wait and see how demand for its vehicles will develop. “Rising income (supported by the greater openness of the economy) should support car demand. However, it is difficult to proclaim a certain growth rate for car sales. ‘Young’ car markets, such as Myanmar, typically show high volatilities in growth rates of car sales,” he wrote in an email.

“If [original car makers] are able to raise awareness for their car brands early it is more likely that they benefit from rising car demand,” he said. “There is also probably a small market for luxury cars.”

Local showrooms said Burma’s car market had gone through a boom since car import restrictions were lifted in October 2011, but in recent months volatility had entered the market and sales suffered from a fall in demand.

“A lot of people now have a car already and demand is slowing down,” said Myo Han, general manager at Trendy Cars Gallery in Rangoon, adding that customers were getting better informed and demanding lower car prices. Most used cars were now being sold at between US $ 15,000- $22,000, he said.

“Already there are a more than 100 showrooms and the prices go down. It’s a really tough time, maybe half of us can survive until next year,” he said, adding that sales had halved compared to last year when he sold on average 50 cars per month.

Showrooms have mushroomed across Rangoon since 2011, even though government rules only allow dealers to import models from 1997-2007, and these vehicles can only be sold in exchange for a registered older car. Since July 2012, Burmese citizens have been allowed to import cars made after 2008.

Such restrictions are a hindrance to business, the showroom owners said, adding that government policy on car imports is overly complicated and subject to constant change.

“We can’t plan which cars to import—last year the government changed their policy four times,” said Myo Han, adding that most car dealers were forced to use individual citizens to import models produced after 2008.

A large car dealer, who declined to be named as his firm was still being registered, said, “All the government departments have relaxed their rules recently, but the Department of Transport is still difficult to deal with, like in the old times. Because if it’s difficult [to import cars], you have to pay [them] to get it done quickly.”

Despite such challenges to their business, local showrooms said they were not worried about competition from a new Ford dealership offering brand-new cars on sale in Burma.

“All the Burmese people are used to buying second-hand Japanese cars. They don’t buy American cars,” said Myo Han of Trendy Cars Gallery. “If Toyota or Honda will come to open a dealership, maybe then it will be difficult for us.”

Source: The Irrawaddy

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