Luxury Cars Before Paved Roads… A Sure Recipe for Disaster

Quite incredibly, luxury automakers are not only rushing into Myanmar… but many of them already have 1,000+ sq. m. showrooms there.

British automaker Jaguar Land Rover Automotive PLC opened its first showroom in Yangon just last month. This was on the heels of the Mercedes-Benz showroom that opened in May.

Germany’s Daimler AG is reporting that sales have been robust since it opened and has received 50 orders within its first month of operation. The most popular model being their luxury sedans, including the US$160,000 E-Class.

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According to Nikkei Asian Review, the head of Jaguar Land Rover’s local sales agents said it aims to sell 100 units in its first six months. Amazing when you consider that the most inexpensive vehicle the company offers is the Land Rover Freelander SUV, which costs more than US$110,000 in a country where the average annual wage is just US$1,100 per annum.

Nevertheless, when one tastes (even a modicum of) success, more will certainly follow. Case in point, BMW’s first showroom in Yangon is scheduled for October, and Rolls Royce has stated they will be there as well before too long.

Haven’t yet made my way over to Myanmar, but the description from friends and associates who live there doesn’t exactly jibe with images of luxury cars rolling around the streets… or even of paved roads for that matter, although I’ve heard there are a few.

One of the things said about Yangon many times, and that I’ve noted, was how safe it is there. A female friend has mentioned that she no longer feels the need to raise her guard whenever she hears a motorbike ride up from behind, unlike the situation in Kuala Lumpur, where she was previously based and where bag-snatching by two on motorbike is extremely common. But one has to wonder how long that safety will last when a tiny few are driving around in luxury cars and the rest of the population is considered lucky if they have enough for a most basic motorbike.

Wage disparity is a real issue, not only in emerging and frontier markets like Myanmar but also in places like the United States. It’s a serious issue, and it seems to be getting worse each year.

Central banks and politicians proclaim each election cycle that, yes, it is a serious concern… only to follow up with more fiscal and monetary policies that crush the lower classes, diminish savings, force people into debt, and push people out of the labor market.

Yangon is like any city in the world and deserves its chance to prosper and shine. Running before walking is bad financial sense, though, and certainly the potential setting for a political economy of disaster.

H/T: Nikkei Asian Review