Industry observers said they welcomed the notice, which was obtained by The Myanmar Times last week, from the ministry’s Directorate of Trade outlining parameters for distributors to sell new cars in Myanmar though some added it is at most a first step and further clarification is required.
Ford became one of the first among other global car makers to successfully plant their flag in Myanmar. Others including Nissan, Mazda, Mercedes Benz and Hyundai are currently expanding their presence in the country.
The ministry’s notice on “Procedures for Importing, Selling and Distributing Brand New Cars through a Showroom System” states that new car imports are now limited to distributors with an agreement directly with the manufacturer, and outlines conditions, including a maximum inventory of 100 vehicles at a time, that the distributor must provide warranties and a service centre, and must hold a license for a showroom.
Ministry of Commerce director of the Directorate of Trade, U Than Aung Kyaw, said some 220,000 new and used vehicles have been imported to Myanmar since reforms in the sector began in September 2011, adding the ministry notice governing new vehicle distribution are based on the “3S principles” – sales, service, and spare parts.
The showroom distribution system will work in tandem with private citizen’s right to import one new vehicle each during their lifetime, he said.
US-based Ford Motors will distribute vehicles through Myanmar-based Capital Automotive, a subsidiary of Capital Diamond Star Group, and in partnership with emerging markets firm RMA Group.
Capital Diamond Star owner, U Ko Ko Gyi, said the firm plans to expand its Ford sales across the country as business grows.
Edwin Vanderbruggen, partner at law firm VDB Loi, said there is a something of a “gold rush” on for distributors looking to set up in Myanmar.
“The importation and distribution of new cars until now has been based a bit on unpredictable practices – even a bit chaotic,” he said.
The Ministry of Commerce has worked to come up with an improved basis for new imports with its notice, he said, adding the notice is an excellent first step.
However, a few points in the notice await some clarification, Mr Vanderbruggen said. A company with a showroom licensed to import new cars must be a local firm under Myanmar’s current policy, but often firms with the experience to run a service centre, which is now a requirement to import new vehicles, are foreign companies.
U Aung Thet Lwin, head of sales and marketing for Jardines Cycle and Carriage – the Myanmar distributor of Mercedes – said he supports the regulations laid out by the Ministry of Commerce.
“We see it as a chance for international brands to set up and do business here, but not every [distributor] will meet the requirements,” he said.
He said in practice foreign companies are beginning to distribute certain finished products in Myanmar ahead of the ASEAN Free Trade Area in 2015, when the barrier on distributing finished products is slated for removal.
He added that some distributors have indirect arrangements with the manufacturer through intermediaries, which may cause problems as this is not specifically allowed for under the new rules, but added Jardines deals directly with Mercedes.
Distributors with an extensive sub-dealer network may face challenges, as U Than Aung Kyaw told The Myanmar Times, because the 100 vehicle limit is not for each sub-dealer but for the distributor. In that case, a distributor with 15 domestic sub-dealers would only have a handful of cars on hand at each location.
However, U Khin Tun, managing director of Ford distributor Capital Automotive, said the firm supports the government rules as they provide protection for consumers, who often do not have experience purchasing new vehicles.
“It has been possible to order from the factory, but local customers from Myanmar aren’t familiar with this and often they want to visit a showroom and see the cars in person,” he said.
He highlighted provisions allowing for consignment-based imports as a step which would increase consumers’ choice in Myanmar.
Ford is finding success early on the Myanmar market, having sold about 100 vehicles since its soft launch two months ago, said the firm’s Asia Pacific emerging markets manager David Westerman.
Among its rotation of vehicle models Ford will offer in Myanmar are the popular Ranger, Explorer and Taurus. They will not be inexpensive however, with an imported Ford Explorer costing about $105,000. The Thai-made Ford Single Cab Ranger has a far cheaper price tag at just $22,000.
Source: Myanmar Times