Toyota Motor Corporation is planning to build an automobile factory in Myanmar.
An official announcement could come before the end of the month, with construction on the plant to start this year.
The plant would be located in the Thilawa Special Economic Zone on the outskirts of Yangon and would assemble pickup trucks through so-called knockdown production, in which parts imported from Japan and other nearby nations are put together at the new plant.
Myanmar has a population of about 50 million people, on par with South Korea and Spain. It is also a young nation, with an average age of 27.9. While it is one of the poorest countries in Asia, it has seen strong economic growth recently and is expected to grow at annual rates of six to seven percent.
Though only about 17,500 new automobiles were sold in the country last year, the figure more than doubled compared to the previous year. Toyota currently exports about 2,000 passenger and commercial vehicles to Myanmar per year and sees the market as one with strong growth potential.
As at last December, Toyota had 50 automobile and parts production sites in 27 nations and regions. The Myanmar factory would be a new strategic base.
The Myanmar government has implemented policies that give preferential tax treatment to companies that produce automobiles locally.
Suzuki Motor Corporation was one of the first entrants among Japanese automakers. It has two factories in the country assembling compact cars, for which it now commands more than half of the market.
Nissan Motor Corporation and Corporation are among the other automakers that have a presence in Myanmar.
Toyota decided to build a new plant in Myanmar because it expects the country of about 50 million people to have strong economic growth going forward. The decision is also partly the result of the Myanmar government’s efforts to lure foreign investment.
Myanmar’s per capita gross domestic product is only about U.S. $1,300 (about ¥140,000). However, the average age of the country is low and the population is expected to continue to grow.
Analysts believe Myanmar has the potential to grow into a market similar in size to neighbouring Thailand (population about 69 million), where about 1 million automobiles are sold per year.
While Myanmar’s automobile market has been characterised by the overwhelming popularity of used Japanese vehicles, sales of new units doubled in 2018 compared to the previous year. This and other signs indicate a growing market for new vehicles.
The government is also providing preferential treatment to companies that manufacture cars locally. Such factors have enticed several automakers to move into the country.
According to the Myanmar Survey Research Co., in addition to Suzuki and Nissan, Kia Motors Corp. and Hyundai Motor Co. of South Korea, Ford of the United States, and others are already operating locally.
As few parts manufacturers operate in Myanmar, automakers assemble cars using imported knockdown parts. The maturation of Myanmar’s auto manufacturing industry hinges on whether or not parts makers move into the country.
In response, the administration led by Aung San Suu Kyi passed the first major reform of the nation’s corporate law in about a century last year.
Restrictions on foreign currencies were relaxed and a new investment and foreign economic relations ministry was established to solicit investment.