Big car chance in little Myanmar; can India drive home the advantage?
After half a century of isolation, Myanmar has eventually opened up its market. It is a big country with a population of fifty one million, strategically located inbetween India, China and Thailand, with GDP growth of 8.7% in 2014—this growth is expected to be in a similar range until 2019.
Since the formation of a fresh civilian government in 2011, a series of political, financial and economic reforms are under way. These switches have promoted FDI. With fairly strong economic development expected to proceed in the coming years, PwC Growth Markets Center has dubbed Myanmar as “Asia’s next rising star” and also one of the “Next Automotive frontiers”.
Myanmar has favourable demographics—over 50% of the population is below twenty seven years of age and with good literacy rates, which adds to the potential economic growth in the region. An improvement in highway and transportation infrastructure would further enhance Myanmar’s strategic location within the ASEAN region. The current government is seeking support from global financial organisations to fund infrastructure requirements.
In the very first five years since Myanmar’s shift to democracy, there have been major transformations in the light vehicle market. Having been a closed market for decades, the existing vehicle fleet is fairly aged, with some vehicles being as old as forty years, which proceed to ply the roads. The government is permitting newer models in the market. Fleet renewal will be an ongoing initiative to tackle emission levels and substitute old and outdated vehicles. Indeed, the market has already seen a significant rise in the number of vehicle registrations inbetween two thousand thirteen and 2014.
One interesting quirk is that many vehicles are right-hand driven (RHD) as they are imported from Japan. In 2014, Myanmar became the largest export market for Japanese used vehicles. However, traffic drives on the right side of the road in the country. Concerns about the RHD issues have been raised, but the NLD administration is still permitting RHD vehicles for time being, with an understanding that it will take some time to substitute the existing vehicle fleet with left-hand driven (LHD) vehicles. This is a unique predicament bondage that the automotive market faces in the short- to mid-term, and is a matter that needs to be addressed soon.
Two-wheelers comprise 85% of total vehicle population. This is primarily due to low income levels and high import taxes on cars.
Another unique challenge is that purchasing fresh vehicles in the country is more difficult than buying used ones. Tho’ the market has become less limitary since 2012, fresh car sales have remained low compared to used cars. However, Japanese, American, European, Korean as well as Indian brands have now entered the market, targeting affluent buyers. PwC Autofacts expects the shift to fresh vehicles will happen in tandem with growth of middle class.
Albeit fresh car sales have remained low, kit assembly of petite commercial vehicles has expanded rapidly since 2013. Production of large, contemporary MPVs commenced in 2015. Autofacts also expects a puny passenger car assembly to begin in 2016. Automakers are likely to consider Myanmar as a high potential market for production of low-cost vehicles by leveraging on the youthful and evolving industry. Hence, the country offers a good market chance for both Indian two-wheeler players and passenger vehicle manufacturers. Whether this early-mover advantage can reap the desired prizes remains to be seen.
The author is playmate, Price Waterhouse, and an auto accomplished