Local car prices turn volatile as online market for govt car import permits emerges

Prices for semi-knocked down (SKD) cars assembled in Myanmar have declined during COVID-19. While this was due to a drop in demand due to travel restrictions and the suspension of initial vehicle registrations to avoid physical crowds at the Road Transport Administration Department’s offices, one other reason why sales have stalled is the issuance of car import permits to government employees.

“Since the government employees have received car import permits, the prices of SKD cars have fallen a lot. Some of the SKD brands have been forced to reduce their prices to lure buyers. It’s a buyers’ market now,” said Ko Aung Tun, a car importer.

Since they were made available, some importers have purchased the car import permits from government servants at between K1.5million and K15 million, car importers said. “Although government staff are given car import permits at lower tax rates, the sale of permits can be seen in the market. There is an online market for car permits depending on the CIF (Cost, Insurance and Freight) and rank of the permit,” said U Sein Lwin, another car importer.

The government granted car import permits to some 7000 civil servants as part of their job perks in December 2020. Government employees aged 57 years (three years before retirement age) on October 1, 2020, with at least 25 years in service are entitled to the civil servant car permit scheme which can be applied on a yearly basis. The car permits are given out based on ranks: director generals in the civil service can import cars worth K15 million, K8 million for deputy director generals, K6 million for directors, and K1.5million for assistant directors.

Demand for SKD cars – that is, those assembled by manufacturers with local facilities – rose when the government in 2018 permitted only left-hand drive vehicles to be imported. Since 2018, car import volumes have dropped as buyers’ options became limited to left-hand drives. But now that there is a market for car import permits, SKD traders are lowering their prices to be more competitive. “For example, the European and Korean cars enter the market at K40 million. So, the locally produced cars cannot be priced at those levels anymore. They have to reduce the price,” said Ko Aung Tun.

SKD traders said regular car prices have declined by an average of K4 million. Higher-end cars that cost 40 Million above decline between K2 million and K20 million depending on the manufacturer. In the used-car market, vehicles are being sold at a loss.

“Demand for used Japanese cars is the highest and transactions of locally produced used SKD cars have also picked up. There are people reducing the price of locally produced cars by as much as
K10 Million,” said U Tint Lwin, car broker.

Meanwhile, the official import license fee for importing motor vehicles into Myanmar will be kept at the reduced rate of K30,000 per license until January 31, according to the Ministry of Commerce. The fee has been reduced from K50,000 to K30,000 since April this year after the number of applicants per month declined to below 50 from more than 500 before COVID-19. – Translated