Myanmar not ready yet for auto boom

THOUGH MYANMAR has the potential for a boom in its automotive industry, it may take more than five years to enjoy tangible benefits in reality, according to Soe Tun, president of Myanmar Automobile Manufacturers and Distributors Association and managing director of Farmer Auto Trading Co.

“It is not the right time for newcomers to enter the Myanmar market, as many players here are struggling to survive. A lot of used-car showrooms may shut down in the near future because they cannot make ends meet,” he says.

The majority of car sales centres in Myanmar are owned by locals, though 100 per cent foreign investment is allowed in the auto industry. Among the total of over 100 sales centres in Yangon, more than 90 per cent are owned by Myanmar nationals.

On average, less than 100,000 passenger cars and 30,000 commercial vehicles are usually sold in Myanmar every year. Farmer Auto usually sells out over 2,000 cars yearly. Vehicles with a price range of between 10 to 20 million kyats (Bt240,000 to Bt480,000) are the best sellers in Myanmar, according to the statistics. Soe Tun also seems worried that the nature of the industry itself, including a ban on Yangon licences, unstable car import policies and tax regulations, along with increasing office and land rental fees and limited resources may deter the growth of Myanmar’s auto industry.

“Currently, the auto market in Myanmar is inactive for two main reasons. First, the nature of the auto business does matter. As it is the rainy season, there are floods in some parts of Myanmar, including big cities like Mawlamyaing and Hpa-kant. It is usual that the auto business is not doing well at such time,” he says.

“Second, it has been over two and a half years since the authorities prohibited the issuing of licences to vehicles registered in Yangon region. Currently, discussions are underway to relax this restriction. We hope the regional government will re-allow the import of cars in the city next month. Potential buyers are all waiting for this announcement. So, they are not willing to panic.”

Yet, he expects better market conditions in the next open season from October until late May.

Currently, those who need to buy a car either for passenger use or for commercial purposes have two options to choose from if they want to drive their cars in Yangon, the nation’s commercial hub. One is to buy a slip of an old car licensed in Yangon, and another is to have their cars registered in other states and regions, he explained.

“Most of the buyers prefer Yangon-licensed vehicles because they are much easier to sell if they want to buy a new model. Provided that Yangon licences are currently prohibited, buyers usually have to bear some additional costs. If the authorities issue the Yangon licence again, there will not be such unnecessary costs, leading to lower auto prices here,” he says. He said traffic congestion still remains despite the ban on Yangon licences that the authorities put in place with the aim of solving heavy traffic in the city’s business districts.

At present, most of the new buyers usually register their cars in Bago region located near Yangon. “If Yangon licences are re-allowed, people will no longer buy the cars registered in other states and regions, except for some competitive advantages. Then, it will be hard for us to sell such cars,” he says.

Since late 2011 when the private sector was first allowed to import of vehicles, nearly 600,000 passenger cars and 350,000 commercial vehicles, including trucks and buses, have been imported – 70 per cent of them registered in Yangon region. Currently, Japan-made cars account for nearly 95 per cent of all the vehicles in Myanmar.

He urges the authorities to push for enactment of a by-law to accompany the Myanmar automobile law enacted in September 2015.

“It has been nearly three years since the law was enacted. But the by-law has yet to follow. Authorities should urgently undertake it,” he says.

The association played an active role in drafting an automobile policy in cooperation with the Union of Myanmar Federation of Chamber of Commerce and Industry, during the previous government’s term. The changes in the administration delayed the enactment of the policy, he added. “It will be the best if we have a strong, stable policy framework in place. If not, all the players in the auto market will unavoidably face the music,” he says.

“Currently, the Ministry of Industry is drafting the new automobile policy, which has not been publicised yet. We are also keeping an eye on that. In reality, a policy cannot be as effective as a law can, because it does not include penalties for breaking something prohibited. Taking actions is needed to enforce rules and regulations.”

Only 7,500 new cars assembled in Thilawa Special Economic Zone were sold last year. Yet, he foresees a bright future for domestic manufacturing of brand new cars and spare parts over the next three years.

Source: The Nation

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