Myanmar may offer a huge opportunity for mainland carmakers seeking to tap into the growing demand for vehicles in one of the poorest countries in Asia.
Chery Automobile is talking to Myanmar's state-owned industry company to produce its QQ taxis in the country, where the market is dominated by Japanese used cars.
Cars and real estate are the most preferred assets in Myanmar.
A second-hand Honda seven-seater produced in 2001 with 118,000 kilometres in mileage is priced at US$27,000 in a showroom in Yangon, at least 10 times more than that in Hong Kong.
A high tax rate on imported cars also contributes to the high price. Officials said the all-in tax for vehicles of 1,300cc or below was 165 per cent. For larger vehicles, the duty and tax will be more than 200 per cent. The tax has been reduced from 300 per cent.
The state-owned No1 Heavy Industries Enterprise two years ago started to import parts and components from Chery and assemble QQ taxis in Yangon.
The QQ, priced at 7.5 million kyat (HK$65,300), is about one-third the price of a Japanese secondhand car as it is exempted from import tax.
"Taxi drivers love QQ as they are much more fuel-efficient," said Zaw Tun, a director of Heavy Industries.
In the past two years, about 3,000 QQ taxis had been assembled in Yangon while 2,500 units were sold, Zaw Tun said. This compared with 14,000 taxis imported from Japan last year.
"Myanmar's motorists still perceive that Japanese cars are of better quality than Chinese cars," he said, adding that more education was needed to change their mindset.
This year 1,300 QQ cars will be assembled in Yangon.
Next week, representatives from Chery would visit the minister of industries, Zaw Tun said.
Heavy Industries also assembles light trucks by importing parts and component from Tata Motors and Tiger heavy trucks of India.
Car prices in Myanmar have come off the boil after the government opened up the distribution market two years ago and lowered taxes. Showrooms have opened in the city and prices have halved.
"Locals are more cautious about buying a car now as the price has dropped," a taxi driver in Yangon said.
Zaw Tun admitted that the price decline would be unfavourable to talks with Chery over the joint venture. "But in the long term, we are confident that the demand for QQ will be good."