Second-hand cars, especially Japanese models, will continue to dominate the market in Myanmar but the outlook for new vehicles – including luxury brands such as Mercedes – is improving, Mizzima Business Weekly has found.
Second-hand Japanese cars have been popular in Myanmar for decades, mainly because of reliability and an ample supply of spare parts, and their market dominance has been strengthened by the availability of fairly recent models since import restrictions were eased in early 2012.
Dr Soe Tun, a part owner of the Farmer Car Showroom which opened on Saya San Road in January last year, said second-hard Japanese vehicles were selling strongly.
“The market for new cars hasn’t developed yet because of higher CIF [cost, insurance and freight] prices, and because of economic conditions,” Dr Soe Tun told Mizzima Business Weekly.
“Most customers can afford to spend up to about 100 lakhs (about US$10,000) on a second hand car,” he said, adding that there was a clear reference for Japanese models.
“If a customer had to choose among a Japanese, South Korean or Chinese car worth about 60 lakhs, they would choose the Japanese car because of their reputation for better quality.” His observations were echoed by U Htay Aung, the owner of the Sakura Auto Workshop on Thitsar Road in Yangon’s outer South Okkalapa Township.
“Used cars, especially models imported from Japan will continue to dominate the market for a long time,” U Htay Aung said, adding that a small but growing number of buyers could afford to buy luxury vehicles from Europe and the United States.
It’s the luxury market that is being targeted by Mercedes-Benz, which opened a showroom on Pyay Road on November 29.
“We decided after sanctions were dropped that we want to be the first luxury automotive brand in the market,” Wolfgang Huppenbauer, the president and chief executive officer of Mercedes-Benz Singapore and Daimler South East Asia, told Mizzima Business Weekly at the lavish opening ceremony.
Mr Huppenbauer said he expected it would take time for the market for luxury vehicles to develop and the company did not intend to “rush it”.
As well as passenger vehicles, Mercedes-Benz was also keen to enter the market for commercial vehicles, including buses, he said.
“We are already in discussion with our partners here to bring in our Fuso brand trucks,” Mr Huppenbauer said.
He acknowledged that Mercedes-Benz would have competition from the new Ford and Nissan vehicles that have gone on sale in Myanmar, adding that they were “very interesting products, but they are not in the upper luxury segment.”
Nissan has unveiled plans to produce vehicles in Myanmar, but Mr Huppenbauer said Mercedes-Benz had not yet considered production or assembly because the market was still relatively small.
“But you never know, if the market grows – you have 60 million people here – anything could happen,” he said.
Asked about import targets, Mr Huppenbauer said it would depend on how the market developed and it was unlikely to be fast.
Many factors were involved, including taxes and the amount of duty that might have to be paid. The growth potential of the automobile market was highlighted in a press statement released in September this year by US-based market research company, Frost and Sullivan.
It said the market was likely to grow at a compound annual rate of 7.8 percent and reach 95,300 units by 2019 and would be driven by a growing economy, infrastructure development and higher incomes.
“Real growth is likely to start only after 2014,” Frost and Sullivan’s associate director for automotive practice, Asia Pacific, Mr Dushyant Sinha, was quoted as saying in the statement.
“However, factors such as unpredictable regulatory changes, high car prices, under- developed auto service market and inadequate road infrastructure might hinder the potential growth,” he said.
The statement noted that motorcycles accounted for more than 80 percent of the market, followed by passenger vehicles (11 percent), trucks (3 percent) and buses (1 percent).
Mr Dushyant said Japanese brands were expected to continue dominating the market until 2019, with Honda, Suzuki and Nissan gaining in popularity because their compact cars would appeal to Myanmar customers.
Chinese and South Korean models would also see growth because of more affordable prices and smaller engine sizes compared to Japanese vehicles, he said.
Vehicles from the United States and Europe would have a minimum level presence in the market because after sales service, especially for spare parts, was still limited, Mr Dushyant said.
The challenges facing the automotive market included an under developed after sales sector, inadequate road infrastructure and unpredictable regularity changes, he said.
Court proceedings in the wake of communal violence in Myanmar have often seen Muslims sentenced more quickly and to harsher punishments than non-Muslims, a Mizzima investigation has found.
Can wind, sun and hot springs solve Myanmar’s electricity crisis?
Renewable energy resources offer Myanmar a cheaper and more cost-effective way out of the country’s dire electricity shortages than coal or gas and diesel, an international business analysis company believes.
Philips powers ahead with LED marketing strategy
The regional electronics arm of Dutch-based conglomerate Philips has unveiled a marketing strategy aimed at winning a bigger share of lighting product sales in Myanmar.
Philips Lighting singapore and export has appointed three Myanmar companies to supply the retail, commercial and government markets, the conglomerate said in a statement issued at a press conference at the Sedona hotel on November 25.
Pahatma Group will focus on the retail sector and the JJ-pun and power Light companies in the commercial and government sectors.
Philips says the company’s emphasis on quality will enable it to compete effectively against cheaper lighting products.
Philips Lighting singapore and export general manager Mieke De schepper was confident the strategy would lead to a strong market share but declined to give figures.
“It’s hard to give exact numbers on the expectations of sales,” Ms De schepper told Mizzima Business Weekly at the press conference.
Pahatma Group managing director Kyaw Thein tan said the company began distributing Philips light-emitting diode (LED) bulbs on the retail market in October.
“Sales volumes are yet to reach the target but Philips has expectations of selling the equivalent of two container loads of LED products each month,” U Kyaw Thein tan told Mizzima Business Weekly.
Cheaper alternatives may be one reason why sales targets are yet to be met.
U Kyaw Thein tan said Philips LED bulbs cost up to 10 percent more than other bulbs because they were of higher quality.
LED bulbs sell well in Yangon and Mandalay, he said, but sales in other cities were weak.
Despite the market resistance, U Kyaw Thein tan said he expected that the market for LED bulbs would grow as consumers began to realize the cost advantages of better quality products JJ-pun – a joint venture between singapore-based manufacturing, engineering and distribution company Jebsen and Jessen – and family-owned serge pun & Associates Group, is already involved in a project at one of Yangon’s most significant historic sites.
The company is working with the Yangon city Development committee to install philips LED products to upgrade Mahabandula Garden, near the sule pagoda, JJ-pun senior manager Soe Moe Min Oo told Mizzima Business Weekly on the sidelines of the November 25 press conference.
“The company is also in discussion with government ministries about other proposed projects in Yangon and other areas,” U Soe Moe Min Oo said.
The news release quoted Ms De schepper as saying that energy infrastructure will come under increasing pressure as the country develops and urban populations grow.
“Yangon currently consumes 45 percent of Myanmar’s energy supply and this is likely to increase as development continues,” she said in the statement.
“It is imperative that people make use of energy-efficient solutions as they can help to achieve significant savings and meaningfully bring electricity demand and supply into balance,” she said.
Switching to energy efficient technologies such as LED bulbs would amount to an estimated $9.7 million in reduced electricity costs and 45 kilotons in carbon dioxide a year.
“Half of these savings can be achieved in Yangon alone,” she said.
As well as contributing to energy-efficiency, Philips is also supporting architectural conservation efforts in Yangon. It has contributed $75,000 towards the cost of 200 blue identification plaques for heritage buildings and has conducted a lighting audit of heritage areas in collaboration with the Yangon heritage trust and the Yangon Mayor’s office.
This Article first appeared in the December 05, 2013 edition of Mizzima Business Weekly.
Mizzima Business Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com
A growing alcohol market has its downsides
About two o’clock in the afternoon a few months back, a small convoy of expensive sports cars stopped outside what is dubbed a “Day Club” in Yangon, in this case one of the classier restaurants in the commercial capital seeking to make some money during the quiet period of the day. As the drivers revved their engines, the nouveau riche teenagers piled out in fashionable clothes, the girls in revealing dresses, intent on
partying. Wine coolers, beer and stronger liquor were par for the course, as were the inevitable photos flashed on Facebook afterwards to brag about the excess.
Dawei SEZ ‘Won’t happen without the Japanese,’ say experts
The flurry of activity by the Thai government to try to kick life into a special economic zone and port proposed for Dawei on Myanmar’s southeast coast is unlikely to lead to any significant development without Japanese support, observers say.
Big-thinking entrepreneur targets building hardware market
During his six years with a company that sells building materials wholesale to construction companies, Myo Htwe often wondered if there might be potential for a retail outlet.
The time seemed right for such a business and Myo Htwe, 38, working with his wife, Aye Aye Han, managing director of the Zin Htet building supplies company, was also encouraged by requests he received from foreign business people.
“They sometimes asked me if there was a retail store supplying a range of construction products similar to the Home Depot outlets in the US,” he told Mizzima Business Weekly.
Myo Htwe began developing a business plan for his idea two years ago, bolstered by the findings of a market survey he conducted that estimated the retail outlet’s growth potential and customer buying power.
When Myo Htwe decided it was time to realise his concept, he thought big and in a prime location.
He opened the Pro 1 Home Center a month ago in the Sawbwargyigone building hardware market on Lannthit Street in Yangon’s Insein township.
The outlet, in an area bustling with businesses supplying construction materials, occupies a site covering about 3.5 acres, which real estate market sources say is worth about US$50 million.
He said he bought the land step by step in the Sawbwargyigone market, expanding to its present size.
The retail outlet covers more than 2 acres and the site also has a warehouse and parking for up to 150 vehicles.
Myo Htwe, who is Pro 1 Home Center’s managing director, says his outlet is the first of its kind in the country.
“I’m proud to have pioneered the opening of a large retail construction store in Myanmar,” he said.
The outlet has a comprehensive range of building hardware, including tools, timber, paint, flooring, plumbing, garden supplies and plants, and other construction materials. It also provides technical assistance for installing some products.
The opening of the store was the realisation of a strategic vision, says Myo Htwe, and he has also developed a strategic relationship with one of his suppliers: Siam Cement Group (SCG), the largest cement producer in Thailand and its second biggest company.
“I chose SCG because its role as a key player in the regional construction sector makes it a strong partner,” Myo Htwe said.
“As well as supplying a range of construction products, SCG also provides technical and marketing support,” he said.
|PRO Home Center offers a large range of building supplies. CREDIT PRO1 HOME Center|
The range of products that SCG can provide puts it at an advantage over other suppliers, Myo Htwe said, adding that there was another reason why he valued the arrangement with the company.
“I wouldn’t find another contemporary key supplier like SCG in terms of business ethics,” he claimed.
In an example of his ability to think long-term, Myo Htwe said Pro 1 Home Center has signed a memorandum of understanding with SCG to establish a joint-venture business in the future. The joint venture will be launched after the government allows foreign investors to operate retail outlets, he said.
As well as construction products from SCG and other Thai suppliers, the outlet also sources supplies from companies in China, Malaysia, Vietnam and Europe.
Myo Htwe is confident that the outlet’s location in the biggest construction materials precinct in Yangon will prove an advantage in attracting customers.
“Customers often complain about the traffic in the Sawbwargyigone market area as they go from shop to shop to buy the materials in which each outlet specialises,” he said.
“As a one-stop shopping outlet for construction products my customers can avoid the traffic jams.”
Acknowledging that it’s too early to predict market share, Myo Htwe says the outlet is already attracting about 120 customers a day, a number he hopes will rise above 300 after Pro 1 Home Center’s grand official opening ceremony tentatively set for the third week of December.
Customer appeal was one of the factors which motivated Myo Htwe to choose such a large plot for the business.
“A key approach of my business concept focused on running the business on a big scale, because then the bargaining power of the store with suppliers will be stronger,” he said.
“As a result, the store will be able to offer lower prices than competitors and attract more customers.” Myo Htwe declined to say how much he had invested in the store but acknowledged that a risk factor was the large sums needed to be able to display a comprehensive range of products and to keep his warehouses well stocked.
“Another risk factor is making the right decision in choosing the products themselves, especially in terms of quality,” he said.
“I have to input product knowledge to make the right decision.”
One of the challenges in running the business is the lead times needed for ordering supplies to ensure timely delivery.
“I have to prepare stock lists of products about three months in advance because of the time it takes to import products from overseas,” Myo Htwe said.
“For example, to arrange for the delivery of products needed next April, I have to begin preparing the orders now,” he said, adding that the ordering process was influenced by market conditions and yearly sales trends.
“One of the biggest challenges of running a retail building supplies store is the systematic management of the warehouse.”
Pro 1 Home Center has four warehouses. As well as the godown in its main compound, the company’s central warehouse is in the Shwepyithar industrial zone. It has small warehouses next to its main compound and in downtown Yangon’s Pazundaung township.
Even though the outlet opened a month ago, Myo Htwe is already thinking big for the future.
“I’m planning to set up a chain of retail outlets around the country, with the first to be in Mandalay,” he said.
But there may be limits to what Myo Htwe’s outlets can offer, according to other building suppliers.
Sein Htun, manager of the Myanmar Top Power Construction Company, urged caution. “Currently, the construction retail store so-called one-stop service cannot yet supply various construction materials demanded by the big construction projects, only just provide materials for single houses and modest construction projects.”
The store’s competitors, who specialize, can handle provide materials in bulk.
“Specialized construction supply stores know construction products and the knowledge needed, respectively, and can offer various brands of specific construction products such as cement and iron,” said Sein Htun.
This Article first appeared in the November 21, 2013 edition of Mizzima Business Weekly.
Mizzima Business Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com
Myanmar’s fuel supply at risk from tardy Thai planning
THAILAND’S failure to heed advice from the International Energy Agency about its perilously small oil and fuel stocks exposes Myanmar to the risk of serious energy shortages in the event of an international crisis, say oil industry analysts.