After half a century of isolation, Myanmar has finally opened up its market. It is a big country with a population of 51 million, strategically located between India, China and Thailand, with GDP growth of 8.7% in 2014—this growth is expected to be in a similar range until 2019.
Since the formation of a new civilian government in 2011, a series of political, financial and economic reforms are under way. These changes have promoted FDI. With fairly strong economic development expected to continue in the coming years, PwC Growth Markets Center has dubbed Myanmar as “Asia’s next rising star” and also one of the “Next Automotive frontiers”.
Myanmar has favourable demographics—over 50% of the population is below 27 years of age and with good literacy rates, which adds to the potential economic growth in the region. An improvement in highway and transportation infrastructure would further enhance Myanmar’s strategic location within the ASEAN region. The current government is seeking support from global financial organisations to fund infrastructure requirements.
In the first five years since Myanmar’s shift to democracy, there have been major transformations in the light vehicle market. Having been a closed market for decades, the existing vehicle fleet is quite aged, with some vehicles being as old as 40 years, which continue to ply the roads. The government is allowing newer models in the market. Fleet renewal will be an ongoing initiative to tackle emission levels and replace old and outdated vehicles. Indeed, the market has already seen a significant rise in the number of vehicle registrations between 2013 and 2014.
One interesting quirk is that many vehicles are right-hand driven (RHD) as they are imported from Japan. In 2014, Myanmar became the largest export market for Japanese used vehicles. However, traffic drives on the right side of the road in the country. Concerns about the RHD issues have been raised, but the NLD administration is still allowing RHD vehicles for time being, with an understanding that it will take some time to replace the existing vehicle fleet with left-hand driven (LHD) vehicles. This is a unique predicament that the automotive market faces in the short- to mid-term, and is a matter that needs to be addressed soon.
Two-wheelers comprise 85% of total vehicle population. This is primarily due to low income levels and high import taxes on cars.
Another unique challenge is that purchasing new vehicles in the country is more difficult than buying used ones. Though the market has become less restrictive since 2012, new car sales have remained low compared to used cars. However, Japanese, American, European, Korean as well as Indian brands have now entered the market, targeting affluent buyers. PwC Autofacts expects the shift to new vehicles will happen in tandem with growth of middle class.
Although new car sales have remained low, kit assembly of small commercial vehicles has expanded rapidly since 2013. Production of large, contemporary MPVs commenced in 2015. Autofacts also expects a small passenger car assembly to begin in 2016. Automakers are likely to consider Myanmar as a high potential market for production of low-cost vehicles by leveraging on the young and evolving industry. Hence, the country offers a good market opportunity for both Indian two-wheeler players and passenger vehicle manufacturers. Whether this early-mover advantage can reap the desired rewards remains to be seen.
Source: The Financial Express
