New vehicle import policy disruptive to Toyota’s Myanmar strategy

Sales of Toyota cars are expected to trail behind that of other car makers in Myanmar as a result of the government’s latest vehicle import policy, a spokesperson for Toyota Motor Corporation said.

Under the new policy, which was announced and made effective last month, all new imported cars must now be left-hand-drive in accordance with Myanmar’s road rules. By doing so, the government intends to gradually phase out older right-hand-drive vehicles to improve safety and traffic congestion on the roads.

The new policy is expected to have a negative impact on Toyota’s revenues, as the car maker sells mostly used right-hand-drive cars in Myanmar. Currently, imported Toyota cars are the most popular cars in the country due to quality and price despite the fact that right-hand-drive cars do not comply with road regulations.

But that may soon change. ‘’Next year, we will have to expand into the new left-hand-drive car market because of the government’s strict new import policy against right-hand-drive cars,” said Mr Tatsuya Kijimoto, chief representative of Toyota Motor Corporation’s Yangon office.

New factory?

But Toyota will face several challenges on that front. For one, competition in the new left-hand-drive car market is rife, with other car makers already ahead after having established car assembly lines in the country. Suzuki, for example, recently set up a factory in the Thilawa Special Economic Zone, while Nissan and Ford have factories near Yangon.

To compete effectively with its Japanese peers, Toyota must consider setting up its own assembly line in Yangon. That will likely be a costly move for the car maker.

“Toyota’s new-car market is very small in Myanmar compared to other countries. We sell only 4,000 new units in Myanmar per year compared to over 1 million units in Thailand and Indonesia, 60,000 in Vietnam and 40,000 in the Philippines,” said Mr Kijimoto.

He added that economies of scale is very important in production, the lack of which is why Toyota has not built a factory in Myanmar before. For example, if Toyota assembled its own cars in Myanmar, it must import parts from other countries, which will be expensive. By Mr Kijimoto’s estimates, it could cost Toyota at least $2000-$3,000 more to assemble one vehicle compared to assembling in Thailand.

Favourable treatment

Toyota may have no choice but to bite the bullet though, as car makers with local assembly lines enjoy several advantages over those, like Toyota, which only have new-car showrooms in the country.

The biggest of these advantages is access to the coveted Yangon licenses, which allows drivers to park legally within Yangon. With the number of vehicles in Yangon rising fast and congestion building up in the city, Yangon licenses are now restricted by the government, making them very valuable to drivers wishing to buy additional vehicles.

‘’According to the government’s policy, we can’t register our new vehicles for a Yangon license. Because of this, our new-car sales are far behind that of Suzuki, which is allowed to register its new cars in Yangon,” said Mr Kijimoto.

The government grants special permission to selected car makers with local factories to encourage sales of locally-assembled new left-hand-drive cars. In Myanmar, around 10 car makers have permission to build a local factory assembling cars, The Myanmar Times understands. Besides Suzuki and Nissan, Ford and KIA are also assembling new left-hand-drive cars in Myanmar.

In comparison, Toyota’s new cars are imported from Thailand and Indonesia. The vehicles do not enjoy access to Yangon licenses. Compared to Suzuki, which sells around 300 new cars per month, Toyota sells just over 100 new cars per month.

Last year, Toyota sold 1,000 new cars in Myanmar. This year and next, it hopes to sell 1,500 and 2,000 new cars, respectively.

Car policy

For years, Toyota was actually the most popular car brand in Myanmar because of its quality and reasonable price. Before the government allowed other car makers to open new-car showrooms in Myanmar, nearly 90 percent of Myanmar drivers imported used Toyota right-hand-drive cars.

In 2013, the government officially allowed car makers to open new-car showrooms. Toyota was among those which opened a showroom displaying new car models, but it continued importing used cars to cater to demand. Today, there are about 20 showrooms in Myanmar, including those by Chevrolet and Audi.

In April 2016, the government suspended individual car importing under the Yangon license owing to issues with parking in Yangon. However, imports using licenses from other states and regions were permitted to continue.

The policies were implemented to reduce traffic congestion and alleviate car-park shortages in Yangon. However, many importers found ways to bypass those regulations, such as registering with fake documents and addresses, which did little to improve overall traffic conditions.

While it remains to be seen if the government’s latest policy of banning all right-hand-drive and used cars will have a positive impact on the road, it appears that it is having a negative one on the country’s most popular car maker.

Source: Myanmar Times

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