Plan for New Parts Plant Sign of Myanmar's Expanding Auto Industry

Malaysian parts maker APM Automotive Holdings plans to build a parts plant in Myanmar to meet the demands of an auto industry that is rapidly expanding after the end of years of sanctions.

In a filing with the Malaysia Stock Exchange, APM says it has set up a subsidiary, APM Auto Components Myanmar, to manufacture parts and modules at a plant in a 30-acre (12-ha) industrial area of Bago region in the south-central area of the country.

Analysts say the country now is heavily reliant on imports for its vehicle parts.

The Myanmar Investment Commission permit is for 50 years from the date of the signing of a land lease agreement between APM Myanmar and the Bago region government.

The permit, extendable for two further periods of 10 years each, allows for tax exemptions and other relief under Myanmar foreign-investment law. These include income-tax exemptions, exemptions and relief from customs taxes and internal taxes for machinery and equipment for the new plant.

Construction is slated to start within a year of the lease signing and is expected to take three years to complete at an estimated cost of $9.0 million.

APM already makes a wide range of parts for at least 30 vehicle manufacturers including Ford and Toyota.

Nissan and Suzuki have announced plans to produce small cars and pickup trucks in the former Burma.

Ford, Mazda, Hyundai and Mitsubishi have opened dealerships in Myanmar, which has a population of more than 60 million people and only 340,000 passenger vehicles and 59,000 commercial vehicles registered.

Myanmar's automotive market is projected to grow at a compound annual rate of 7.8% to reach 95,300 units in 2019, says Dushyant Sinha, associate director-Frost & Sullivan Automotive Practice Asia Pacific. Drivers will include a growing economy, infrastructure development and increasing personal income.

“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 says in a statement.

Most parts and components are imported from China and Thailand for assembly activities, as the few locally produced parts available have low added-value, Dushyant says.

Japanese brands are expected to continue dominating the passenger-vehicle sector as far off as 2019, with Honda, Suzuki and Nissan gaining popularity thanks to their small-car offerings, he says.

Chinese and South Korean brands also will see growth, but the U.S. and European presence will remain at minimum level as aftersale-service support, especially spare parts, are still limited, Dushyant says.