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17 Feb 2021


Myanmar politics present high risk to auto production over the long term; faltering demand could see Thailand’s car exports to Myanmar grow by only 2% in 2021 (Current Issue No.3189)


​Following the coup d'ètat in Myanmar, investors' concerns towards the unrest and upcoming government actions have intensified. The automotive industry has already dealt with frequent changes in policy and regulations over the past few years. From KResearch's viewpoint, Myanmar was until recently an interesting market for investment in its auto production, based on how Myanmar represented a growing market and recent policies had proven beneficial to automobile assembly in the country. Moreover, the time seemed to have come for the secondhand cars that currently dominate the Myanmar auto market at over 1 million units to gradually be replaced by newer models once price levels were deemed acceptable. However, the presently high political risk could weigh heavily on foreign investors' decisions to invest in Myanmar's automotive assembly industry, making continued imports of auto parts a necessity.

In 2021, Myanmar is set to encounter risks from many directions, including the risk that car manufacturers may postpone any future investments due to the present political turmoil. Meanwhile, domestic vehicle production has yet to reach the level where it could meet the demand of the growing automotive market in a timely manner, or cope with the economic issues stemming from COVID-19. KResearch projects that while the value of Thailand's car exports to Myanmar will increase, it will only be in the range of 2 to 4 percent, or a trade surplus of USD 86.5-88.5 million, compared to the shipment value of USD 84.8 million in the previous year.

 Nonetheless, if the situation improves over the long term and investors decide to forge ahead with their investment in expanding car assembly plants in Myanmar, the true competitor that Thai car exporters must compete against in Myanmar's automotive market is none other than Myanmar's own vehicle assembly businesses. Presently, Myanmar supports the import of semi-knocked-down (SKD) auto parts for domestic assembly, while planning to establish its own auto parts industry in the near future. By then, Thailand may have reaped the benefits of being a major production base for auto parts exports, with regular shipments to Myanmar to support its ever-growing demand for finished cars. On the other hand, Myanmar's imports of finished cars from Thailand will conversely see a declining trend.