Car prices dive after rule change

By Aye Thidar Kyaw and Aung Kyi
Volume 32, No. 626-May 14 - 20, 2012

Brokers at the Hantharwaddy trading zone last week.
Pic: Yadanar
RECENT changes to car import rules have sent prices tumbling, with some popular models losing more than 50 percent of their value almost overnight.

The changes allow Myanmar nationals holding a US dollar account at selected government and private banks to import a car less than five years old without a permit or providing export credits.

Minister for Commerce U Win Myint announced the changes at a meeting of the Car Import Supervisory Committee at the Ministry of Commerce on May 7. State media quoted him as saying that the ministry was taking “step-by-step measures to enable the public to buy cars freely from car showrooms or through importation”.

The minister said that the government wanted Myanmar’s car-to-population ratio – which is among the lowest in the world – to double from seven vehicles per 1000 people but did not give a timeframe for the increase.

The May 8 report in the New Light of Myanmar did not provide information on engine size limits or the tax that would be charged on the vehicles but it did state that importers would be required to deposit double the cost, insurance and freight (CIF) value of the vehicle to be imported in their account.

“Since we started this substitution program, we intended [to] gradually change the plan to allow people to buy freely, and we’ve done so in a step-by-step way,” U Win Myint told reporters in Nay Pyi Taw on May 7.

However, the suddenness of the changes and their impact on the market have caused significant losses for businesses and individuals who imported vehicles during the past six months.

Car traders told The Myanmar Times last week that rumours had been circulating since May 2 about impending changes to import rules that would affect a car import substitution program the government launched in September, ostensibly to remove unsafe and inefficient older vehicles from the roads.

The program allowed holders of import permits, obtained by handing in an “over-age” vehicle, to import a car made between 1995 and 2006, with some extra rules for four-wheel-drive vehicles. It also tapped huge latent demand for newer-model cars, with prices for import permits hitting a high of about K15 million at the end of April.

However, these had fallen to as low as K7-8 million late last week, with buyers almost non-existent, brokers at the Hantharwaddy car trading zone in Yangon said.

The impact on used car prices was even greater.

Prices for almost all makes and models fell K5 million to K10 million. Among the hardest hit were Myanmar Mini Wagons, which dropped about 55 percent to just K6 million, and Cherry QQ3s, which fell to K8 million, down from K15 million. Models from the early 1990s fell 40pc, from K20 million to about K12 million, brokers said, adding that prices remained unstable and were likely to fall further.

“Prices are plunging and everybody just wants to sell. But because of the rumours nobody wants to buy,” said U Kyaw Nyunt, a trader who has worked at Hantharwaddy for about 30 years.

U Kyaw Nyunt said popular 2006-model Honda Insight sedans have fallen to K23 million from K28.5 million in a few days. “As far as I see, prices will fall by more than half,” he said.

Adding further confusion is the lack of detail over the new import rules, including which vehicles are eligible for import.

A senior Ministry of Commerce official said at a press conference in Nay Pyi Taw on May 7 that only cars with a 1350-cubic-centimetre (cc) engine or smaller would be made available for import.

“Cars of 2007 models or later with 1350cc engine power or lower will be allowed and taxed with a CIF value of US$5000,” a ministry official told MRTV-4.

But reports about the May 7 meeting published in state newspapers made no mention of engine size limits.

U Ko Ko, who is a businessman and car trader, said he imported four vehicles last month to sell and was now expecting to lose a lot of money.

He said the drop in prices had also affected import service companies and newly opened showrooms, which started slashing their prices in line with the market last week.

“We thought this program would gradually be phased out and we could never have guessed that it would change so fast,” he said, adding, “I heard our president got the idea when he visited Japan [in April]”.

Sakura Auto Services manager Ko Aung Naing Htun said service companies holding many permits were likely to find themselves in financial difficulty.

“But now customers are also down; they will surely want to buy newer model cars” than those eligible under the car substitution program, he said.

Car showrooms will likely have to sell thousands of vehicles imported under the car substitution program at a loss.

MRTV-4 reported on May 9 that the Ministry of Commerce had approved 67 applications to set up car sales centres in Yangon, Mandalay and Nay Pyi Taw and these centres had been granted permission to import 13,735 vehicles made between 1996 and 2006.

To buy a car at the centres, buyers need to bring an import permit secured under the substitution program. Of the 13,735 cars, 2273 units have already arrived at the showrooms, with the remainder expected to arrive soon.

A Ministry of Commerce official said cars made between 1996 and 2006 could still only be imported with a permit and that the over-age substitution program would continue for vehicles with la, tha and ah licence plate prefixes.

“We have no plan to change the import permit requirement for older vehicles,” said Deputy Commerce Minister Dr Pwint San.

Newer vehicles are likely to cost less than older models because buyers will not have to have an import permit so traders expect prices for older models to continue to fall.

Until May 3, about 44,500 cars and 1260 buses had been substituted to the Directorate of Transport Administration, with the Ministry of Commerce giving out permits for 39,800 cars and 749 buses.

A separate import program open to Myanmar working abroad and domestic companies with foreign currency accounts has seen 4400 vehicles imported.

“No one is buying overseas workers permits to import 2007-model and above cars. If you want to buy one you can get it for K500,000 immediately,” said U Tee Lone, a car broker based in Tarmwe township.

While car owners and importers were left fuming over the snap changes to import rules, prospective car buyers welcomed the likelihood of more affordable vehicles.

“It is good to hear news that every citizen will be allowed to import a car. As a result, people who don’t have a lot of money will still be able to own a car,” said U Zaw Moe, a grocery store owner in Dagon Myothit township. “Before, we couldn’t even get a good running condition saloon car for K10 million – even a 1985 or ‘86 model Nissan Super Saloon not included in the substitution program was more than K10 million.”
Ref:myanmartime