Currency depreciation, policy changes a barrier to motorisation

Myanmar will reach the income level required to become “motorised” before neighbours Laos and Cambodia, but policy changes and currency instability threaten to undermine the market.

As incomes rise, new vehicle sales are likely to increase. Myanmar citizens will reach the level of income required for motorisation to take off by 2019. Laos will reach this stage in 2021 and Cambodia not until 2024, according to a recent report by BMI Research.

“Carmakers that have built brand awareness through the second-hand market will be poised to take advantage when new sales gain traction,” said the report.

BMI Research defines motorisation as GDP per capita of US$3000, at which point incomes are seen as high enough to make the transition to vehicles.

The research company also predicts that high-end cars will become increasingly attractive as the demand for luxury vehicles grows.

Changes to import rules in Myanmar since 2011 have removed thousands of beaten-up cars from the roads, made newer vehicles more affordable and led to dramatic growth in business for sales centres.

Over 300,000 new vehicles have been imported to Myanmar since then – more than doubling the number of registered cars in the country. Following the eighth policy change last year, Minister for Commerce U Win Myint said that there would be no more amendments.

However, as complaints about congestion in Yangon reach fever pitch, the government has since issued a new draft law for motor vehicles. In state newspapers in July, it said that all vehicle importers, sellers and maintainers must obtain licences from the Road Transport Administration Department.

The department will have the ability to grant or deny licences, though the draft law does not describe what actions will be taken against importers with business licences who disobey the law. The government also requires importers to prove they have space to park their car, a rule that has left many frustrated.

All of these changes are confusing and harmful to business, said local and foreign businesspeople in the sector. The government should set a clear and stable policy to help boost sales, or businesses will be unable to adopt fixed prices and investors will lose confidence, they said.

The weakening kyat is a major problem – the currency has fallen by almost 25 percent this year to date versus the US dollar, to K1285 by yesterday.

This means that while the import price of Japanese vehicles – the most popular among buyers – is stable, nobody wants to pay with Myanmar kyat because it is weakening, said U Moe Kyaw, information officer for the Myanmar Automobile Manufacturers and Distributors Association.

Source: Myanmar Times

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