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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