YANGON – Used Japanese cars are flooding Myanmar, thanks to duty reductions and deregulation since President Thein Sein’s government was inaugurated in 2011 in a shift to civilian rule.
The trend, however, will likely be challenged by increased competition from European and U.S. carmakers that are opening showrooms in Yangon, the commercial capital of what many call Asia’s last economic frontier.
Their arrival follows moves to lift most of the economic sanctions against the formerly junta-ruled country as it democratizes.
According to the Myanmar Ministry of Transport, the country had around 390,000 cars registered as of October, up around 50 percent in the 18 months since April 2012, when the tally stood at around 260,000.
Used vehicles from Japan account for more than 90 percent of the cars on Myanmar’s roads, according to one estimate.
Research firm Frost & Sullivan says Myanmar’s auto market will start to grow substantially starting this year or soon thereafter, predicting an average 7.8 percent annual expansion through 2019, helped by growth in income.
Automakers also see strong potential demand for new cars.
After exiting Myanmar during the junta’s rule, Suzuki Motor Corp. returned last year to resume production of small trucks.
Nissan Motor Co. has announced it will start building cars in Myanmar in 2015, while Mazda Motor Corp. and Mitsubishi Motors Corp. plan to start selling new cars.
Among European and U.S. carmakers, Ford Motor Co. and General Motors Co. have opened showrooms. A local reporter said such a move would be unthinkable during the days of the junta, when the country was struggling under Western sanctions.
Such German luxury brands as BMW and Mercedes-Benz are also entering the market.
Myanmar’s auto market, however, is not risk-free. Development of paved roads has been slow, while regulations are prone to abrupt changes.
Another headache for Japanese automakers is a possible move discussed in some quarters about limiting imports to left-hand drive models in the country where cars run on the right side of the road. Government officials are apparently concerned about the increase in accidents after Japanese cars, in which the steering wheel is on the right, started flooding the market.
Masaki Takahara, head of the Yangon office of the Japan External Trade Organization, a trade promotion arm of the Japanese government, said, “Japanese cars will likely lose their market share due in part to intensifying competition. Enhancing after-sale services, not just marketing, will be the key to the future.”