Second-hand Japanese cars have been popular in Myanmar for decades, mainly because of reliability and an ample supply of spare parts, and their market dominance has been strengthened by the availability of fairly recent models since import restrictions were eased in early 2012.
Dr Soe Tun, a part owner of the Farmer Car Showroom which opened on Saya San Road in January last year, said second-hard Japanese vehicles were selling strongly.
“The market for new cars hasn’t developed yet because of higher CIF [cost, insurance and freight] prices, and because of economic conditions,” Dr Soe Tun told Mizzima Business Weekly.
“Most customers can afford to spend up to about 100 lakhs (about US$10,000) on a second hand car,” he said, adding that there was a clear reference for Japanese models.
“If a customer had to choose among a Japanese, South Korean or Chinese car worth about 60 lakhs, they would choose the Japanese car because of their reputation for better quality.” His observations were echoed by U Htay Aung, the owner of the Sakura Auto Workshop on Thitsar Road in Yangon’s outer South Okkalapa Township.
“Used cars, especially models imported from Japan will continue to dominate the market for a long time,” U Htay Aung said, adding that a small but growing number of buyers could afford to buy luxury vehicles from Europe and the United States.
It’s the luxury market that is being targeted by Mercedes-Benz, which opened a showroom on Pyay Road on November 29.
“We decided after sanctions were dropped that we want to be the first luxury automotive brand in the market,” Wolfgang Huppenbauer, the president and chief executive officer of Mercedes-Benz Singapore and Daimler South East Asia, told Mizzima Business Weekly at the lavish opening ceremony.
Mr Huppenbauer said he expected it would take time for the market for luxury vehicles to develop and the company did not intend to “rush it”.
As well as passenger vehicles, Mercedes-Benz was also keen to enter the market for commercial vehicles, including buses, he said.
“We are already in discussion with our partners here to bring in our Fuso brand trucks,” Mr Huppenbauer said.
He acknowledged that Mercedes-Benz would have competition from the new Ford and Nissan vehicles that have gone on sale in Myanmar, adding that they were “very interesting products, but they are not in the upper luxury segment.”
Nissan has unveiled plans to produce vehicles in Myanmar, but Mr Huppenbauer said Mercedes-Benz had not yet considered production or assembly because the market was still relatively small.
“But you never know, if the market grows – you have 60 million people here – anything could happen,” he said.
Asked about import targets, Mr Huppenbauer said it would depend on how the market developed and it was unlikely to be fast.
Many factors were involved, including taxes and the amount of duty that might have to be paid. The growth potential of the automobile market was highlighted in a press statement released in September this year by US-based market research company, Frost and Sullivan.
It said the market was likely to grow at a compound annual rate of 7.8 percent and reach 95,300 units by 2019 and would be driven by a growing economy, infrastructure development and higher incomes.
“Real growth is likely to start only after 2014,” Frost and Sullivan’s associate director for automotive practice, Asia Pacific, Mr Dushyant Sinha, was quoted as saying in the statement.
“However, factors such as unpredictable regulatory changes, high car prices, under- developed auto service market and inadequate road infrastructure might hinder the potential growth,” he said.
The statement noted that motorcycles accounted for more than 80 percent of the market, followed by passenger vehicles (11 percent), trucks (3 percent) and buses (1 percent).
Mr Dushyant said Japanese brands were expected to continue dominating the market until 2019, with Honda, Suzuki and Nissan gaining in popularity because their compact cars would appeal to Myanmar customers.
Chinese and South Korean models would also see growth because of more affordable prices and smaller engine sizes compared to Japanese vehicles, he said.
Vehicles from the United States and Europe would have a minimum level presence in the market because after sales service, especially for spare parts, was still limited, Mr Dushyant said.
The challenges facing the automotive market included an under developed after sales sector, inadequate road infrastructure and unpredictable regularity changes, he said.
source: Mizzima
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