Monday 4 February 2013

CIF changes create headaches for car importers, say traders

Car sales have slowed to a crawl since the Ministry of Commerce cut cost, insurance, freight charges – used to determine the amount of tax owed on vehicles – for imported automobiles in December.

Showroom owners say customers are waiting until the new, lower prices kick in before making their purchase.


About 80 percent of all imported cars are affected by the cut in CIF, which amounts to about 5pc of the total price of the car. However, the CIF reduction is about 10pc of the previous value in many cases.

“The 10pc cut in CIF values translates to lower prices. For instance, a Toyota Mark II sedan cost about K19 million before the end of December but is K18 million at the new rate,” said Dr Khant Win, managing director of Assurance Services Enterprises car showroom.

However, U Htay Aung, chairman of Sakura Auto Auction Centre, said the reductions had left many importers facing reduced profits or even losses.

“We order cars for import one or two months in advance. Then we arrange shipment and pay in advance. The ministry reduced CIF rates by 10pc for some models in December. As a result, car prices are falling, and we can’t make an after-tax profit on the cars that have already arrived in port here,” he said.

Buyers of inexpensive models benefit most from the tax cut, and can save themselves hundreds of thousands of kyat by waiting for the new rates, say car showroom owners in Yangon.

“Buyers in the K18 million range don’t want to pay the old CIF rate because that would cost them an extra K500,000- K700,000. But buyers in the K40 million-plus range don’t care about the extra K2 million they would have to pay at the old rate. They won’t buy at a car market because they don’t know the car’s history. They want to go to a showroom, and they’re prepared to pay the extra to do so,” said Dr Khant Win.

A 2003 Toyota Alphard would fall in price from K40 million to K32-K33 million, a 1997 Prado TZ from K40 million to K32 million, and comparable vehicles would be reduced in price accordingly, according to prices at the Hantharwaddy car trading market.

Car import permits were selling for about K8.5 million, including broker fees, on January 31. Permits are required to import vehicles eligible for the vehicle import substitution program, which includes cars made between 1996 and 2006. A separate import scheme allows consumers to buy cars with engines smaller than 1.35 litres in capacity without a permit.

In a related development, some importers are reluctant to collect their imported cars from ports because they fear the change in import policies might leave them open to fines. U Htay Aung, chairman of Sakura car showroom, said the CIF rates imposed in December are applied only to vehicles with 380 horsepower or less.

“Cars that have more than 380 horsepower or more are stuck at port because we have to pay increased duties on them since December,” he said. Current port policy states that automobiles can be held at port for 60 days, after which the government can auction them off.

One trader at Hantharwaddy said the falling prices are encouraging some importers to leave their vehicles at port rather than attempt to sell them at a loss.

U Zar Htet Myint, another car trader, said prices of popular models had declined by up to K7 million following the December changes.

“As far as I’ve heard, the Ministry of Commerce spoke with large importers to discuss the changes [to CIF values] before they released the news to the public,” he said. “Since the new CIF prices came out in December, the prices of most cars have fallen. For example, a Toyota Hilux Surf is selling for about K28 million, down from about K35 million in late 2012.

“But it can cost up to K32 million to import a Hilux Surf after the purchase price, shipping and duties are all paid. It’s very hard to make a profit after that, which is why some importers are just leaving their cars at port,” he said.

source: The Myanmar Times
http://www.mmtimes.com/index.php/business/3991-cif-changes-create-headaches-for-car-importers-say-traders.html

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