Automotive industry outlook is bright, with needed changes

New analysis from Frost & Sullivan finds that the market, currently dominated by used vehicles, is likely to grow at a compound annual growth rate (CAGR) of 7.8 per cent (2012-2019), to reach 95,300 units in 2019 due to greater integration with the rest of Asean.
“However, factors such as unpredictable regulatory changes, high car prices, an under-developed auto service market and inadequate road infrastructure might hinder the potential growth,” said Dushyant Sinha, associate director, Automotive Practice, Asia Pacific at Frost & Sullivan.
Dushyant also said that most parts and components are imported from China and Thailand for assembly, as the few locally-produced parts available have very low added value. He added that completely knocked-down (CKD) parts used for assembly requires a licence for import, which expires after every 3 months.
According to KPMG’s research on Myanmar’s infrastructure, the country’s road network extends for 150,816 km but only one fifth is paved. This network now supports 2.33 million vehicles, including 295,000 passenger cars and 87,200 buses and trucks. The rest are motorcycles.

Registered motor vehicles
Myanmar’s 150,816-km-long road network serves 2.33 million vehicles.
- 1.93 million mortorcycles
• 295,000 passenger cars
• 67,200 trucks
• 20,000 trucks
Source: KMPG, Asean-Japan Transport Platform Project, Myanmar Road Transport Administration Department

According to Ipsos Business Consulting, Toyota is now the favourite brand among Myanmar consumers due to a long presence in the market, perceptions of durability and availability of spare parts. Under Toyota Tsusho Asia Pacific, it has recently opened an official spare parts and service centre in Yangon with plans to open further centres in Mandalay and Naypyitaw in 2014. In the 2012-2013 fiscal year, 745,000 trucks were registered in Myanmar, a 10 per cent increase from the previous year.
In the year, 331,500 passenger cars were registered, up by 20 per cent. This will rise further, as the government in the 2011-2012 fiscal year kicked off the car substitution program to replace ageing cars. This programme initially targeted automobiles older than 40 years with plans to expand to automobiles 30-40 years and 20-30 years.
“Gradually Myanmar will begin seeing a shift to brand new cars ordered from local showrooms now being set up by the big global automotive icons,” Ipsos said in the “Automotive in Myanmar” report released late last year. “We believe that once the infrastructure is fully developed, there will be incredible progression in the automotive industry both for primary and local second tier parts suppliers.”
Among global names that penetrate the market is Nissan. It is now constructing the US$200 million manufacturing plant, set to be the country’s largest automobile manufacturing site and the first in the Bago region.
Through a joint venture Cycle & Carriage Automobile Myanmar, Mazda will open a showroom in Yangon. Suzuki will restart its mini-truck factory in Yangon. Through local partners, First Myanmar Investment (FMI) and Yoma Strategic, Mitsubishi opened a service centre in May 2013.
The influx of automobiles is also driven by non-Japanese players.
South Korea’s Hyundai opened a showroom and service centre with its local Myanmar partner Fortune International Limited in August 2013. Beijing Auto (BAIC) will launch a number of service centres in Yangon, Nay Pyi Taw and Mandalay, through Aung Gabar Company’s help. Ford Motor in October opened the first showroom and service centre.
Through local partner Pacific Alpine Myanmar, Chevrolet is kicking off its service centre in Yangon this year with plan to replicate more in other cities. Mercedes-Benz Myanmar is formed and its marketing reach is extended to Nay Pyi Taw.
BMW Group Asia in May appointed Prestige Automobiles as its authorised importer of BMW automobiles in Myanmar.
The Directorate of Investment and Companies Administration (DICA) recently announced that World Novi will enter Myanmar. It deals with car import and export business and related machine parts, with help from Japanese private banks such as Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsubishi Banking Corporation and Resona Bank.
The growing auto market however has caused traffic jams particularly in Yangon.
According to Yangon Region chief minister Myint Swe, Myanmar has imported nearly 200,000 automobiles since the government’s new car replacement scheme began two years ago As a result, traffic congestion has become the number one problem in the country’s former capital. As of September 2013, Myint Swe said that Yangon now has 303,840 cars on its streets.