The Staggering Growth of E-Commerce
Internet and Mobile Penetration
Correlation of GDP and Motorization Rate
Motors’ Report on the Booming Automotive Industry in Emerging Markets examines the current and future state of the automotive industry in the emerging world. As the leading online car classifieds operating in twenty emerging countries, our report provides a detailed look into the global state of automotive sales and how car purchasing behaviors have changed due to the drastic increase of internet and mobile penetration, rising GDP, and the emergence of a middle class.
The findings in this report are the result of quantitative surveys conducted online with both car buyers and car dealers across Asia, Africa, Middle East and Latin America, and in-depth interviews with industry influencers across the world.
Using historical data from more developed markets, and analyzing how those factors impacted the automotive market in those regions, we seek to provide a glimpse into the future of automotive sales and motorization rates in emerging countries.
65% of global consumers plan to buy a new or used car in the next 24 months. Latin America and Middle East/Africa will have the strongest auto demand 75%, followed by Asia 72%.
Over half of online consumers in North America (56%) and half in Europe plan to buy a new or used car in the next two years.
When it comes to new cars, purchase intent is strongest in Asia, where 65% of respondents say they will buy new in the next two years, compared with 7% who plan to buy used cars.
In Latin America, 47% of respondents say they will buy a new car, while 28% plan to buy used. Similar ratios are found in Middle East and Africa (45% new vs. 30% used) and North America (34% new vs. 22% used).
Growth of global E-Commerce in new markets has notably outdone more mature markets such as U.S., U.K., Japan, and Western Europe. Emerging countries in Latin America, Middle East, Africa and Asia have shown the strongest market base and fastest regional growth since 2011.
E-Commerce sales are expected to skyrocket by 20.1% in 2015, reaching up to $1.5 trillion.The primary contributors to this growth are the rapid expansion of online and mobile user bases in emerging markets (as documented in the visualization above), new shipping and payments options, and major brands expanding to more new international markets. Recent E-Commerce statistics show that 40% of worldwide Internet users, which amounts to more than 1 billion online buyers, have purchased products and goods online via desktop, mobile, tablet and other devices and is projected to continuously grow.
In 2014, consumers in Asia made E-Commerce purchases totaling $525.2 billion, which was significantly higher than E-commerce purchases in North America, which reached $482.6 billion. Meanwhile, E-Commerce sales in Latin America reached $799.2 billion, and in the Middle East sales are expected to rise from $9 billion to $15 billion by the end of this year. Recent signs of developments in the African region have raised projections of B2C E-Commerce sales to double-digit numbers in billions by 2018.
In more developed markets, auto E-Commerce has grown at such a staggering rate that now as many as 80% of new car and almost 100% of used car customers begin their car shopping experience online. There is no reason to doubt that emerging markets will rapidly catch up to these figures. Evidence of this phenomenon can be seen when looking at automotive Google Search Queries (provided by Google). The Year over Year search growth is astonishing, particularly in Africa.
A 2013 McKinsey report on Automotive Retail Innovation states that auto dealers are no longer the primary source of information, especially for consumers between 18 and 34. Up to 90% of consumers in this group use a mix of OEM and dealer sites, forums, blogs, and social media to gather information and compare prices and offers before making their final decision. Taking to the internet to research and purchase cars shows no signs of slowing down.A global study released by Accenture in April 2015 concluded that 75% of drivers polled would consider working through the entire car-buying process online.
With internet and mobile penetration significantly growing in emerging markets, the rate of moving the car shopping experience online is beginning to mirror that of Western Markets. In the Philippines, one of the top five countries in internet and mobile penetration, almost 80% of car buyers use the internet to conduct research on a car before making a purchase.
The trend between GDP Per Capita and level of car ownership relies heavily on a country’s economic development. Countries with low GDP per capita are seen to have a similarly lower level of car ownership as only few people, even the wealthy ones, are able to afford a car. Countries with greater population density tend to continuously improve on the public transport system and infrastructure, leading to a lower need for private cars or other types of vehicles. In other emerging markets, where the public transport system and infrastructure improvements are growing slowly, and safety standards are not being met, there is a greater incentive for people to opt for their own vehicles rather than rely on public transportation.
The IMF recently projected that the growth of GDP in emerging markets will be substantially higher than in developed economies, within the next five years.
According to the IMF, vehicle ownership accelerates quickly when countries reach an income level of about $2,500 per capita. This rapid growth continues until it reaches the cap, which is about $10,000 per capita. At that income, U.S. per capita vehicle ownership levels hit about 800 per 1000 residents, while European and other OECD countries have around 650-800 vehicles per 1000 residents. China and India, with GDP per capita figures about $7,500 and $3,300, are right in the middle of the rapid motorization phase with vehicle ownership in both countries growing at an explosive rate. The above chart offers a look at the correlation of GDP and motorization rates in our Asia and Africa markets.
According to the Myanmar Ministry of Rail Transportation, the country had 643,719 registered cars in December 2014, a significant increase in a mere year and a half, when the tally stood at 260,000.
The trend shows no sign of stopping. Research firm Frost & Sullivan predicts that the auto market in Myanmar will expand an average of 7.8% through 2019, attributed in part to growth in income.
Myanmar’s auto industry was dramatically transformed in 2011 due to the new government’s change in import restrictions that previously made purchasing a car in Myanmar one of the most expensive worldwide. The government rolled out an old car replacement plan, providing car owners import permits for newer model cars, in exchange for the old vehicles. A report by Ipsos Consulting showed that by August 2012, a total of 58,7116 import permits were issued under this program. In the following years, car showrooms have popped up and further restrictions have been lifted.
Five years after Myanmar’s military dictatorship ended, the nation’s business potential has been recognized.
Economically, it is one of the fastest-growing countries on Earth – with an 7.8% growth of GDP from FY2013-14, and an 8.5% GDP growth projection for this year.
Myanmar has come a long way in GDP, internet/mobile penetration, and the banking sector. From an internet penetration of nearly 1% before the launch of international operators Ooredoo and Telenor, both telco's have managed to sell over 9M SIM cards. According to the Myanmar Survey Research, the Internet and mobile penetration will hit over 20% in Yangon, the capital city, led by the availability of inexpensive smartphones and SIM cards. All of these factors have completely changed car purchasing behaviors in Myanmar.
Based on Motors Car Dealer Survey, almost half of car dealers in Myanmar reported in increase in car sales over the past twelve months, while the same number reported a decrease. This phenomenon is caused by the constantly changing government policies on car taxes, import regulations, and the CIF (Cost, Insurance, and Freight) price. The main concern for car buyers is price; very few report being loyal to brands or models. Therefore, CIF pricing has a big influence on which cars are popular. One Motors’ Car Dealer Survey participant stated that, “The main concern of car buyers is safety and fuel consumption, which is mainly very good on new cars. Adjusting the CIF pricing for new cars to this wish would definitely have a positive impact on the car market."
The frequent changes in auto policy in Myanmar have created uncertainty for both buyers and dealers. Last year, policy was changed every 3 to 5 months.
To resolve this issue, various influential players in the automotive industry, such as The Ministries of Industry, Revenue & Taxation and Rail transport, but also unions, including UMFCCI and MAMDA, have joined in an attempt to build a firmer foundation for the industry. Their goal is to standardize the automobile policy so that it becomes more attractive for foreign investors.
Based on the Motors Car Buyer Survey, Motors.com.mm found that 80% of car buyers in Myanmar are still using traditional media such as newspaper as their source of information, which influences their purchasing decision. Car buyers are surprisingly also starting to use new media, including car buying platforms such as Motors.com.mm (72%), Internet (54.5%) and social media (18.2%). Car buyers also find that dealer sites (27.3%) and visit to auto expos (27.3%) influence their purchasing decisions.
Myanmar car dealers are increasingly moving to digital media to advertise their listings. Our study found that all car dealers in the country are starting to recognise the advantages of advertising their listings online. Motors.com.mm is also seen as a great way to advertise car listings, with more than 72% of dealer survey participants currently advertising their car listings on our platform. Car dealers in Myanmar are aware of the potential that social media brings with 57% currently using social media. Even with the shift to online, car dealers in Myanmar are still comfortable with advertising listings through Journals and Newspaper Classifieds with 50% still focusing primarily on newspapers.
For online media, Facebook is arguably the most popular social media platform, used by over 72% of car dealers in Myanmar to advertise their listings. Dealer sites are also a preferred option to advertise car listings with 60% of Myanmar dealers actively using them.
While this is Motors.com.mm data, these numbers are substantiated by Oxford Business Group who confirms that, in Myanmar, the largest supplier of new cars is Toyota. Over 60% of people in Myanmar drives a Toyota, and 32% of car buyers in our study consider buying a Toyota in the future.
In terms of auto commerce in Myanmar, there is definitely a strong shift of people going online. However, the state of car sales remains uncertain as it truly depends on the policies ushered in by the government. Once this country has reached stable auto tax policies, I am certain that the market demand of cars will grow