Substitution plan shakes car markets but questions remain
September 19 - 25, 2011
Volkswagen Beetles are among the cars included in the Ministry of Rail Transportation’s plan to substitute old cars for newer vehicles.
Pic: Kaung Htet
THE government last week unveiled a car substitution plan that bears similarities with the United States’ “cash for clunkers” program that immediately sent shockwaves through the second-hand car market.
The plan to remove “overage” vehicles that use too much fuel, cause accidents and traffic jams via lack of maintenance and pollute the air was launched at a press conference in Nay Pyi Taw led by the Minister for Rail Transportation, U Aung Min, on September 11.
U Aung Min said the three-stage plan would initially target vehicles 40 years of age or older and will kick off with number plates beginning with salon, salane and zagwe. Owners of those vehicles will be able to exchange those cars for a permit to import a newer model, according to state media. Specifically, the newer vehicle must have been made no earlier than 1995 and have been bought for US$3500 or less.
Unlike other recent car imports allowed by the Ministry of Commerce, the cars to be imported may be either left- or right-hand drive. The plan will be overseen by the Directorate of Road Transport under the Ministry of Rail Transportation and will be followed by similar programs to substitute cars 30-40 years old and then 20-30 years.
Car owners interested in substituting their vehicles must present ownership papers that match the car and “ownership complaint, shared inheritance vehicles, stolen vehicles and vehicles which was in pawn and hired and illegal vehicles” will not be accepted.
The Directorate of Road Transport will inspect and scrutinise vehicles to ensure they are registered, a notice in the state-run New Light of Myanmar newspaper on September 11 said.
Cars handed in “will be sent to the foundry”. The plan also allows owners of older vehicles keep using their cars.
“However, vehicles would be substituted if Directorate of Road Transport found that vehicles are in danger at the time when renewing their licences.” Taxes on the imported vehicles will also be “set and levied in accord with the rates set by the Ministry of Finance and Revenue and the Ministry of Rail Transportation”.
The Ministry of Finance and Revenue and the Ministry of Commerce will levy a combined 65pc import tax and the Directorate of Road Transport will charge a tax of 100pc, or a total of 165pc of the imported car’s value.
However, the value of the old car will be deducted from this amount. For example, a person importing a car worth $3500 will be required to pay $5775 in tax, plus the value of the car – a total of $9275 minus the value of their existing vehicle.
However, it was unclear whether the directorate would have an agreed value list to determine the value of imported vehicles or if owners would be required to present receipts for their cars. Nor is it clear how the value of the vehicles being removed from the road would be established. Car traders at the Hantharwaddy car trading zone in Kamaryut township said the announcement had shaken the car market.
“The announcement was huge – some people who own newer model cars [post 1995] immediately sold their cars for 30 percent below the normal price,” said U Aung Win, a trader at Hantharwaddy.
He said that 2004 model Toyota Mark II sedan owners reduced their asking prices from K80-90 million to K50 million, while Suzuki Wagon R-plus prices fell from K30 million to K20 million by the afternoon of September 12.
At the other end of the market, cars older than 40 years of age such as Mazda B600s, Volkwagen Beetles and Kombis, Mazda Familias and Toyota Corollas, were overnight selling for twice as much as before September 11.
“Laybeins [Mazda B600 pickup] were only selling for K1.5-2 million but now they’re worth K4.5 million, with some owners refusing to sell, even at that price,” said a beans and pulses exporter at Bayintnaung Wholesale Commodity Trading Centre, adding that B600s were common transports for supplies entering the market “I heard the news too late and was unable to buy an old car myself,” he said.
The Ministry of Commerce also plans to provide import permits to exporters, hotels and tourism agencies and investors who officially open foreign exchange accounts with at least $100,000 in government-owned banks, and to Myanmar workers abroad, such as sailors, with at least $30,000 in a government bank.
“We believe this policy will remove cars imported illegally [from the border], if we don’t allow this to happen, that illegal situation will never be stopped,” said U Soe Thein, the Minister for Industry 1 and 2.
The meeting was told that there are 10,000 vehicles at least 40 years old registered with the department, about 8300 more aged between 30 and 40 years and 37,000 between 20 and 30 years old.