Myanmar is the second largest country in Southeast Asia after Indonesia but it is one of the poorest nations in this region. The country has experienced changes over the past 50 years of military rule. The most significant change in Myanmar came after the first National election in 2010.
The vehicle import regulation has been relaxed after the election during 2010-11 by making easier the import of commercial vehicles; trucks over three tonnes and buses over 15 seats. However, major lifts started from September 2011 when the breakthrough rule implemented – the “Old car substitution program” – allowing the application for car import permits to substitute older cars (initially those 20-40 years old) for newer models (those manufactured after 1995).
From May 2011, any Myanmar citizen aged 18 years and up could import one unit of passenger car under his/her own name, only for personal usage. The imports of passenger car for commercial purpose were still limited. As a result, the latest lift was implemented from May allowing individuals or companies to import light trucks less than three tonnes. Currently, in Myanmar there is no more import limits on any kind of vehicle for commercial purpose.
The changes in import regulation resulted in the number of total vehicle registration from around 2 million units (before 2010) to 3.8 million units up to July, according to the Road Transportation Administration Department (RTAD). However, within the four wheelers population, all of the vehicles are still used ones imported mostly from Japan.
According to the data released by the RTAD, around 85 percent of total vehicles are motorcycles which mainly are Japanese and Chinese brands. Motorcycles have a steady growth rate of 8-10 percent per annum and are expected to continue with this growth rate in the future. However, passenger car and commercial vehicles which received direct benefits from the relaxing import regulation are expected to have 15 percent growth per annum in the next coming years compared to only 4-5 percent growth before 2012, as analysed by Solidiance, an Asia-focused management consultancy firm.
Global players welcome, Asian players prominent
From 1998-2008, Suzuki formed a JV company with the government and produced 4,800 vehicles. After that, the permit was cancelled by the government. Approximately 8,500 units were produced during 2008-12 by JVs with the government and Cherry, Tata and Isuzu.
In 2013, the automotive production industry has started to change significantly since many global players foreseeing higher demands of passenger cars have planned to build either showrooms and/or manufacturing sites in Myanmar of which the market’s key players are the Japanese brands.
On the other hand, Nissan is partnering with Tan Chong Motors to build the largest automobile assembly plant in Myanmar. The new plant will open in the Bago region in 2015 to produce Nissan Sunny cars. With 300 workers, it will have a capacity to assemble more than 10,000 vehicles a year.
TTAS, a joint venture between Toyota Tsusho Corp and local Aye and Sons has recently opened its second service center in mid-2013 in Shwe Than Lwin Industrial Zone in Hlaing Tharyar township. By the end of this year, there will also be a Toyota service centre in Mandalay.
Mitsubishi opened its first showroom by a consortium of four companies in May 2013: Mitsubishi Motors, Mitsubishi Corp, Yoma Strategic Holding and First Myanmar Investment. The group also plans to establish service centres in Mandalay and Nay Pyi Taw in the future.
Other global car makers are also recently jumping into Myanmar. Ford Motor Co partnered with RMA Group and Capital Diamond Star group to open a new show room in October. The first Ford show room provides full range of activities from sales and service to spare parts.
General Motors has recently partnered with Pacific Alpine Pte Ltd, an existing exclusive dealer of Chevrolet and Opel in Singapore, and Pacific-AA Motor Ltd, a local distributor of pharmaceutical products, in mid-2013 for the distribution, sales, and service of Chevrolet vehicles in Myanmar. No clear dates have been announced as of when it will operate.
The most recent move is Volkswagen which has opened its first service centre in Yangon in October through a partnership – although non-exclusive – with Yoma Strategic Holdings.
More carmakers from China, India, and Korea are also eyeing the Myanmar market. All investments from car makers will be developing the market to speed up the growth in the years to come.
Given that the automotive industry has only just begun, the selection of a good local partner can define the success in this initial stage as they understand market characteristics and consumer behaviour in a way that most newcomers do not. Not only foreseeing a lot of sales promotional campaigns in the short term, Solidiance also expects to see all players educating the market about the importance of after sales services by coming to authorised service centres and/or using genuine parts in the long term. As a result, marketing communication about maintenance costs can be seen when local car sales is reaching to a limit.
Automotive lubricants gain interests
Thanks to the potential growth of auto industry, the related products like lubricant have drawn high attention from global brands. Currently, there are more than 200 lubricant brands registered in the market.
Solidiance projects that the market size of automotive lubricants which was 52 million litres in 2012 would reach 80 million litres in 2016 as a consequence of vehicle growth.
The majority of Myanmar people go for cheap lubricants (non-synthetic), but updating cars to newer car models would make the market aware of better quality. Owners of vehicles from 2007 and after are now no longer using mineral as they used to. Asian brands particularly from Singapore, Thailand, China and Korea are the strongest players in Myanmar’s lubricant market, but the global brands have now entered the market to sell their products through joint ventures with the local distributors, as opposed to establishing their own operations in the country.
However, strong players in automotive lubricants are mostly Asian brands particularly from Singapore, Thailand, China and Korea.
An obvious challenge encountered in the lubricant market is the increasingly fierce competition on promotional campaigns such as free gifts and lucky draws. As the offered promotions are getting more prevalent to the eyes of customers, it is getting more difficult for lubricant companies particularly in a mass segment to differentiate its brand positioning.
Still some time to boom
Overall, the Myanmar automotive market outlook is positive – thanks to the loosening of regulations, growing industry and investments from global players. However, high-end vehicles and related products will not be growing anytime soon and will remain a small market when compared to the other ASEAN countries. Used vehicles and entry-level level cars will remain the majority of the market. Players of after sales products like auto parts and lubricants are still playing on pricing and promotions. For the business perspective, the few years from now are the years to set up the automotive businesses in Myanmar until the real boom takes place in the next 10 years.
Pongsak Kiatpathomchai is the Senior Consultant at Solidiance, an Asia-focused growth strategy and B2B marketing consultancy firm with sectoral expertise centreed on automotive/industrial application, technology, healthcare and green technology.