[Myanmar] As Car Market Expands, Japanese Models Rule

[News_Editor]

Traffic jams in Yangon are becoming a major downside of the rapidly expanding car market. (Photo: Reuters)

YANGON — Like most residents of Myanmar’s largest city, U Myint Maung never imagined that he would one day be able to buy a car of his own. Now, however, the 63-year-old retired government official is the proud owner of a used Toyota Belta—a vehicle that not so long ago would have been far beyond his means.

Until very recently, Myanmar was probably one of the most expensive countries in the world to purchase a car. Under the former military regime, import restrictions sent prices sky high, making it impossible for all but the well-connected to buy high-end vehicles or even relatively new used models.

That all changed in 2011, when the current quasi-civilian government took power and started steadily opening up the country’s economy. Since then, the Ministry of Transport has changed the rules for importing cars eight times, starting with a scheme that allowed owners of decades-old clunkers to replace them with newer models.

That first step toward liberalizing the domestic automobile market saw the import of more than 100,000 cars, mostly from Japan and South Korea. Then, in 2012, the government announced that anyone with a foreign savings account could import cars. Soon car showrooms were placing more orders for vehicles from Japan.

According to Daw Mar Lar, the director of the Best Auto car showroom in Yangon, small used cars with 1.3-liter engines from Japan are especially popular because they’re reasonably priced and generally in good condition. Another plus, she said, is that it’s easy to find spare parts.

Dealers say that over the past two years, used cars from Japan—which can be shipped to Yangon from any major port in Japan within about three weeks of receiving payment—have made up about 95 percent of sales in a rapidly expanding market.

“Nissan vans, Suzukis, the Toyota Probox, the Honda Fit, the Honda Vitz and the Nissan March are now in strong demand in my showroom,†said Daw Mar Lar. “Most of these models sell for around 10 million kyat (US $10,340).â€

“Demand has increased a lot, because in the past, such imported cars would have cost several times as much as they do now,†she added.

Import licenses can be issued by several different ministries, including the ministries of transport, commerce and customs, and must specify the age and make of the vehicle to be imported. Several Toyota models, including the Harrier, Mark II, Mark X, Hilux Surf, Probox, Belta and Landcruiser, are among the most popular.

Growing demand for cars has also brought increasing competition among car dealers. In Yangon, more than 200 showrooms have opened since 2011. Each one is required to deposit $100,000 with the government and provide a surety of 300 million kyat ($310,000), plus pay an annual fee of $900 to the government, said the owner of one showroom.

These expenses mean that many dealers still prefer to operate out of one of three major trading centers that dominated Yangon’s car market until 2011. According to Ko Tun Myat, a broker at the St. John’s trading center in Lanmadaw Township, cars sold here typically cost about 500,000 kyat ($517) less than the same models on sale in showrooms. On the other hand, he said, his customers must get a license plate within 20 days of making a purchase, whereas those who buy from showrooms have up to a year before they have to replace their dealer plates.

“But in the end, it all depends on what the customer wants,†he said. “If someone likes a car they see here, they’ll buy it. But if they can get what they’re looking for at a reasonable price from a showroom, they’ll buy it there.â€

A bigger worry, he said, is that prices overall are falling—something that he hopes will change next year, when the government is expected to allow the import of 2009 models.

Although Japanese cars have a clear lead in the race to capitalize on Myanmar’s car craze, other country’s carmakers are also hoping to position themselves for future growth in one of the world’s last large frontier markets. US automaker Ford and Mercedes Benz from Germany already have a presence here, and are soon to be joined by Jaguar Land Rover, a British brand now owned by India’s Tata Motors.

But it could be Japan’s nearest neighbor, South Korea, that offers the stiffest challenge to Japanese preeminence.

Hyundai Motors, which opened its first showroom in August and has plans to open 14 dealerships across the country by 2018, said it hopes to capitalize on the popularity of South Korean pop culture in Myanmar to expand its market share in the country.

“Young people in Myanmar who watch Korean dramas visit our showroom and look for cars that were shown in the dramas,†said Oh Sei-young, the chief executive of Kolao Holdings, the sole dealer for Hyundai in Myanmar, according to a report by Reuters. “Hyundai is really keen on the Myanmar market.â€

For now, however, Japanese cars look set to rule the roost for the foreseeable future.

“Japanese used cars will continue to be most people’s number one choice because they really meet their needs,†said U Thura Kyaw, a customer service agent at the Diamond Auto showroom, citing the good value for money of Japanese cars and the ease of finding replacement parts.

At any rate, with import barriers steadily being lowered, all that remains for Myanmar’s car market to really take off is the introduction of a system of credit that puts car ownership within reach of more consumers. So far, however, only a few showrooms offer installment plans—most requiring a 30 percent down payment and full payment within 15 months.

“If we could get long-term installment plans to buy cars in the future, everyone would be able to own a car, just like in neighboring countries,†said retiree and first-time car owner U Myint Maung.

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Source: Irrawaddy.org