Myanmar’s automotive market is likely to grow at a compound annual growth rate (CAGR) of 7.8% (2013-2019), driven by a growing economy, infrastructure development and increasing income. Real growth however is likely to start only after 2014.
Frost & Sullivan said the market, currently dominated by used vehicles, is likely to grow at a compound annual growth rate (CAGR) of 7.8% (2012-2019) to reach 95,300 units in 2019 due to greater integration with the rest of ASEAN.
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“However, factors such as unpredictable regulatory changes, high car prices, under-developed auto service market and inadequate road infrastructure might hinder the potential growth,” said associate director, Automotive Practice Asia Pacific, Dushyant Sinha.
After decades of military control and closed door policies, Myanmar has gradually opened up its economy to foreign trade and investment. Significant developments could be witnessed later, particularly the endorsement of the long anticipated foreign investment law. Besides, the banking, finance and insurance sectors have also undergone various reforms as a part of the government’s efforts to improve business environment.
“A young labour force with a high two-wheeler ownership promises a potential car buying group in the long term,” Sinha said. “Myanmar is highly dependent on two-wheelers, accounting for more than 80% of the market while passenger cars represent 11%. Meanwhile, trucks and buses only make up 3% and 1% respectively.”
Most parts and components are imported from China and Thailand for assembly activities, as the few locally-produced parts available have very low added value. Completely knocked-down (CKD) parts used for assembly require a licence for import, which expires after every three months.
“Only new parts are allowed to be imported into Myanmar,” said Sinha. “There is no restriction on imports of new parts based on the Control of Imports and Exports Act. Despite the import ban for used parts, they are smuggled into Myanmar because genuine parts are highly priced and scarcely available,” he added.
Japanese brands are expected to continue dominating the passenger vehicle market even in 2019, with Honda, Suzuki and Nissan gaining popularity thanks to their small car offerings (such as Honda Fit/Brio, Suzuki Swift, and Nissan March) which would appeal to Myanmar customers.
Chinese and Korean brands will also see growth due to their more affordable prices and smaller engine sizes compared to their Japanese counterparts. However, US and European presence will remain at minimum level since after sale service support, especially spare parts, is still very limited.
Myanmar’s automotive market has to face a number of challenges, such as an underdeveloped aftermarket sector, inadequate road infrastructure and unpredictable regulatory changes,” Sinha said.
