fbpx

Toyota Should Reconsider Myanmar Growth Strategy

Japan’s Toyota should reconsider its growth strategy in Myanmar to maintain pole position in the country.

Toyota vehicles are known for their quality and affordability in Myanmar. As such, the car maker has for years enjoyed the highest share of the local car market.

In fact, Toyota dominates car markets across ASEAN, including in Indonesia, Thailand, Vietnam, the Philippines and even Malaysia, where government policies are tailored to favour local car maker Perodua.

Yet, its leading position in the Myanmar car market has come under threat in the wake of a slew of new government policies favouring its competitors in recent years.

With its car sales in Myanmar already beginning to trail behind its rival Suzuki’s, according to Mr Tatsuya Kijimoto, chief representative at Toyota Motor Corporation’s Yangon Representative Office, it could be time for the car maker to reconsider its growth strategy.

Pole position

Myanmar drivers have imported second-hand Toyota cars since 2011, when former president U Thein Sein opened up the market to foreign car makers. Among the favourites are the Toyota Fortuner, which is imported from Toyota’s factory in Indonesia, the Toyota Hilux, Camry, Corolla and Vios from Thailand and the Toyota HiAce, Land Cruiser Prado and Land Cruiser 200 directly from Japan.

The purchases are made via car brokers, given that Toyota did not have a new car showroom in the country.

In 2013, the car makers were given permission to open up new car showrooms and become official dealers of their models in the country. Toyota, together with its local partner Aye and Sons Ltd, opened a new car showroom in Yangon one year later.

Even though Toyota’s new cars ended up competing with its second-hand vehicles, up until 2015, the car maker enjoyed the lion’s share of the Myanmar car market.

But things began to change in 2016, when the new government raised the stakes by allowing foreign car makers to set up vehicle assembly factories in the country. That move has since seen Toyota’s rivals like Nissan and Suzuki seize more market share after opening factories in Yangon.

Toyota though, has not opened a factory in Yangon. The car maker said that given the size of Myanmar’s new car market, which is just 4,000 units-strong currently, opening a new factory now will not make much commercial sense. Besides, production cost will also be much higher compared to importing directly from Toyota’s factories in other parts of ASEAN.

Since then, the game has changed in favour of Nissan and Suzuki, as car makers with local factories are authorised to issue coveted Yangon licenses to buyers of locally assembled cars. Among the benefits of having a Yangon license is permission to park legally in Yangon. The licenses are controlled by the government and in limited supply.

Competition will get tougher next year, when the government’s latest car import policy takes effect. Under the new rules, only imports of left-hand-drive cars will be permitted. The move aims to align the vehicles with existing road rules, which are drawn up for left-hand-drive vehicles.

The new policy will open up the doors for other car makers, such as those from China and South Korea, which make left-hand-drive vehicles, to enter the local market.

Lessons from ASEAN

Against that backdrop, Toyota should reconsider its strategy in Myanmar to compete effectively with its rivals even as the market continues to open up.

One way is to glean from its experience across ASEAN, where it commands a large proportion of the car market. Currently, Toyota runs production factories in five ASEAN countries -Thailand, Vietnam, Philippines, Malaysia and Indonesia.

One of its biggest markets is in neighbouring Thailand, where Toyota operates three large production factories and controls more than a third of the market. In 2016, Toyota produced a total of 549,000 units, of which some 60pc was exported to countries including Myanmar.

Over the past 50 years, Toyota has also benefited from favourable Thai policies and tariffs, which encouraged the production of cars and car parts and the development of a global car trading hub in Thailand. Toyota also enjoyed a first mover advantage, which enabled it to secure an edge over its competitors.

Now, Thailand is also promoting the use of greener vehicles with incentives like lower taxes to car makers, which bodes well for Toyota’s hybrid and electric vehicles.

In comparison, Toyota’s history in Myanmar is far shorter. And, the market is opening up fast. While Mr Kijimoto sees the possibility of Myanmar eventually becoming a manufacturing hub for labour-intensive car parts, which represents an opportunity for Toyota to capture market share, “development of the local automotive industry is expected to be a long and drawn out process,” he said.

As the Myanmar car market continues to evolve, Toyota will likely remain invested for the long haul if it is to repeat its Thai success story in the country.

 

Source: Myanmar Times

 

To see the original article click link here

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, “Puma Energy”, “MOGE”, “yangon new town”,”MECTEL”, “hydropower”, etc.

.

Looking for foreign investors to invest in your business in Myanmar