Toyota to build its first assembly plant in Myanmar with an initial investment of tens of millions of dollars

SMM News: Toyota is building its first car assembly plant in Myanmar to enter the small but fast-growing new car market in Southeast Asia, according to a number of sources. Toyota's move comes as the Burmese government raises import barriers in an attempt to build a local auto industry, which is expected to prompt more auto parts suppliers to invest in Myanmar.

Toyota's new plant, which will be located in the Delawa Special Economic Zone on the outskirts of Yangon, will initially produce 10,000 pickups a year. Toyota's initial investment is expected to reach tens of millions of dollars, and an official statement is expected to be released by the end of this month.

Although Toyota already produces cars in five Southeast Asian countries, including Thailand and Indonesia, Toyota has been cautious about moving into Myanmar because of the small size of the market and the challenge of ensuring local suppliers. But now Myanmar is cracking down on car imports in an attempt to stimulate carmakers to invest in the country to boost jobs. At present, the special registration fee for Myanmar's imported pickups is as high as 40% of the import price, while locally produced cars do not have to pay these fees, but enjoy duty-free treatment.

The Burmese government has also gradually restricted imports of vehicles driven on the right, reducing imports of used Japanese cars, which were once popular, by more than half. The Myanmar Automobile Association says new car sales in Myanmar doubled to about 17500 in 2018. Japan's Suzuki, which began production in Myanmar in 2013, is well ahead of sales of 10330 vehicles. Toyota, on the other hand, sold only 3017 vehicles because of a higher retail price due to registration fees.

Currently, carmakers use only imported parts to assemble cars in Myanmar, a production model known as SKD or "semi-bulk". But once car production increases, carmakers can move welding and painting processes to Myanmar, where Suzuki and Nissan are considering building facilities.

Toyota's next step will be to build a local supply chain. Toyota plans to localize cars and parts locally to improve its competitiveness. But Myanmar's roads, power grid and other infrastructure are underdeveloped, and few local suppliers can meet Toyota's stringent standards.

A number of foreign auto parts groups, including GS Yuasa, a Japanese battery maker, and Yazaki, a wire harness supplier, have decided to open factories in Delawa to export mainly to the booming car industry in neighboring Thailand. Toyota's presence in Myanmar is expected to boost more such investments.

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