Car prices fall ahead of expected market deregulation

Tuesday, 02 March 2010 15:29 Myo Thein

Rangoon (Mizzima) - Burma's auto sector which is heavily affected by the Burmese junta's high import tariffs and permits fees, is currently experiencing a significant drop in car prices.

Car dealers in Rangoon's Hantharwaddy car market estimate that over the past four months the price of an average car has fallen by more than 50%. Car prices are now at their lowest level since 1997. Many observers believe this downward trend will continue ahead of the expected deregulation of the Burmese car market.

"At the end of last year, car prices dropped a little bit but starting from early 2010 prices fell faster. The prices of the popular Nissan Sunny Super Saloon, Toyota Corolla Van and Suzuki Wagons all fell by more than 50%. The prices of some high-end models have fallen even more", a car broker said.

A Rangoon based journal editor who specializes in economics told Mizzima that overall, "car prices in Burma are artificially high. In international markets, used cars lose value over time. In Burma this wasn't really the case, the artificially high cost of cars was created by the government's monopolization of the car market. Now however the government is selling off many of its assets. And many people expect that there will be a major liberalization in car permits and car import tariffs. The outlook for the current Burmese car market is quite volatile."

Another veteran car dealer said, "Since late 1997 when car prices dramatically surged, car prices have never fallen so fast. In previous years, car prices fell slowly and by small amounts. Now the prices are falling continuously. If you buy a car today, you will lose some value even if tomorrow you sell it back".

A 1997 model Toyota Corolla Van is now selling at Ks. 45-50 million today where last September and October they were selling at Ks. 80-100 million. Similarly the price of a Suzuki Wagon R+ is now below Ks. 25 million while last October they were selling for Ks. 45 million.

The price of domestic manufactured jeeps fell to Ks. 4 million from last year's price of Ks. 7-10 million. Even at the significantly reduced prices less of the cars are being sold. Poor sales of Burmese made jeeps and light trucks have caused production of the vehicles to be temporarily suspended.

The car dealers and brokers that Mizzima spoke to also blamed a large increase in the number of cars sold at government car auctions as another reason for the significant drop in car prices. At these government run car auctions the regime sells cars that were confiscated due to registration and permit violations. Many of the confiscated cars were smuggled into Burma by cease fire groups like the Democratic Karen Buddhist Army (DKBA) and then resold to buyers looking to avoid paying the huge Burmese import tariffs. Presently the government is selling off a large number of the cars that were confiscated over the last few years.

Many observers are convinced that the Burmese regime's car auctions are rigged and that winning bids are artificially low because corrupt officials have conspired with their cronies to fix the bidding process.

"Outsiders have little chance to win in these government-run auctions. The popular and profitable cars are usually bought by junta cronies who have already struck deals with officials before the auction is held. But the auction floor prices and successful bidding prices have a major impact on the outside car market. Now that there are many government run car auctions their low prices are having a strong impact on the overall Burmese car market", a car dealer said. The successful bidders at the government run car auctions in turn resell the cars and turn a tidy profit.

The continued fall in car prices however has caused many would be buyers to hold back on purchasing cars. Many people looking to buy a car of their own for their family or business aren't buying yet because they think car prices will continue to fall. "Previously both members of the public and dealers bought more cars when prices fell. Then prices would rise a little bit when the dealers resold their cars. This is the normal pattern in our market. But even though cars are cheaper now less are being sold" an observer of the car Burmese market told Mizzima.

The deflationary spiral in Burma's car market has caused many of the Burmese car dealers and brokers that Mizzima spoke to lose significant amounts money.