How the new vehicle import policy could disrupt the car market

On October 16, the Supervisory Committee for Motor Vehicles Importing officially released a set of new rules stating that only left-hand-drive vehicles can be imported into Myanmar from 2018 onwards.

Those rules have since ignited much criticism from car traders and other stakeholders who foresee the new import policy as having a disruptive impact on the local car market.

According to the committee’s announcement, only left-hand-drive vehicles manufactured between 2014 and 2018 will be allowed for consignment imports. This includes cars, trucks and buses. Under a consignment system, cars are still owned by the foreign-based exporter but sold by a local broker who then earns a commission on the sale. Many car importers use the consignment system to avoid forking out upfront capital to purchase the vehicles.

Individual importers will be allowed to import left-hand-drive cars manufactured between 2016 and 2018, while individual imports of left-hand drive trucks and buses made between 2014 and 2018 will be permitted.

Meanwhile, imports of vehicles like fire engines, ambulances, excavators and bulldozers manufactured within the last 15 years in 2018 will be allowed.

Controlling traffic

The new rules, which have been discussed and refined since 2015, are aimed at alleviating chronic traffic congestion in cities like Yangon and raising safety standards. As the country’s roads are right-hand-drive roads, only left-hand-drive cars and buses are suitable to be driven. Also, about 95 percent of the cars on the road are imported second-hand, and most are right-hand-drive vehicles.

‘’The government’s aim is to move out the old cars and import new cars as well as encourage more support for locally-produced left-hand-drive cars. However, right-hand drive cars are preferred in Yangon,” said U Aung Than Win, chair of the Motor Vehicles Trade Association.

There are currently 800,000 vehicles in the country and most of them are right-hand-drive cars. “I think nobody likes left-hand-drive cars. So if the government wants to solve traffic congestion, it should think of other ways,” said U Aung Than Win.

He added that the new policy is skewed towards favouring the elite, as few can afford to purchase new vehicles from the local showrooms.

Meanwhile, some car dealers say the new rules could even lead to a spike in the price of right-hand-drive cars in the market as demand for such vehicles rises.

Local production

The new policy is also tailored to draw more business for foreign car makers with local operations, The Myanmar Times understands. Currently, Japanese automaker Nissan runs a car assembly plant near Bago, while Suzuki has a plant in Yangon. Meanwhile, Ford, Toyota and Kia have opened showrooms in Yangon and are monitoring local appetites for new cars.

The government wants to boost support for locally assembled left-hand drive cars by foreign car makers who have invested in the country, as this could encourage more foreign direct investments. “But so far, things have not developed too well. If people liked to buy left-hand-drive cars, they would buy from the local showrooms,” said U Aung Than Win.

Currently, there are 20 showrooms with a total capacity to assemble up to 4,000 new cars per year. In comparison, the government has allowed a total of 587,402 vehicle imports as of May this year, according to the Supervisory Committee for Motor Vehicles Importing.

Left-hand-drive potential

Not everyone is as critical though. In fact, the new policy also has potential to shape the local car market for the better.

U Soe Tun, chair of Myanmar Automobile Manufacturers and Distributors Association, pointed out that investors in the local car plants put in relatively small amounts of capital. “They cannot produce the whole car. They produce only semi-knocked-down (SKD) units,” he said.

He added that at K10 million and K30 million, the new and locally assembled Suzuki and Nissan cars are reasonably priced compared to the second-hand right-hand-drive cars in the market now.

As such, ‘’if the government can decide on an exact policy for local production, foreign investors will be interested to invest a lot and there will be no need to worry about the market. The current second-hand car market will continue while the new car market will develop. [Besides], all the car businesses should have known in advance what kind of policy the government would be setting,” said U Aung Win, chair of the Authorised Automobile Distributors’ Association

Meanwhile, some in the industry are worried that car dealers will import more left-hand-drive cars from China and South Korea, which are perceived to be of lower quality than cars made in Japan or the US and Europe. “China is one of top car-producing countries in the world but it also produced low quality cars and exports to other countries. So, to control the import of low quality cars, the government needs to impose proper restrictions,” said U Aung Win.

The way he sees it, by limiting imports to left-hand-drive cars and encouraging the use of new cars, the government may well succeed in gradually raising road safety standards in Myanmar. “When buying second-hand cars, customers have no guarantee that the cars are in good condition. But if the government allows the use of old cars, the new car market will not develop as fast. So, the government should stop allowing the import of old cars,” he added.

Nevertheless, it will take time for car prices and customer expectations to adjust to the new market dynamics. While locally-made cars by Suzuki and Nissan are reasonably priced and of good quality compared to cars made or imported from elsewhere, the situation now is “nobody can afford to buy brand new left-hand-drive models here because of the price,” said U Aung Naing Tun, director of Sakura car sale center.

“Basically, it is not right that people should struggle to buy cars because of this new policy,” said U Aung Win.

Source : Myanmar Times

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