ASEAN KEY DESTINATIONS
Selling cars in Cambodia’s ‘wild’ market
As the number of vehicles imported into Cambodia is on the rise, the Department of Customs & Excise announced on Wednesday that secondhand motorbike dealers will not be able to import models more than two years old. However, this measure has yet to be adopted by the automotive industry, even though demand for cars is on the rise.
Pily Wong, vice president of the Cambodian Automotive Industry Federation (CAIF) and CEO of Hung Hiep (Cambodia), the Kingdom’s Volkswagen distributor, spoke to the Post’s May Kunmakara this week about whether he thinks the government should consider applying the same rules to the car industry and how increases in import taxes affect local luxury car importers.
What do you make of the government’s plan to regulate secondhand motos?
This is very new to me, but I must say it is a very good idea from the government. I don’t know whether they will extend this rule to the automotive industry, but I’m sure all members of the Cambodia Automotive Industry Federation would welcome it.
If this won’t cover cars as well, the CAIF would surely ask why? In the end, it doesn’t matter if it’s the motorbike or the automotive industry, our businesses and our challenges are very similar.
How important are such regulations to the growth of the legal car industry?
This kind of action not only can create more dynamism for the industry, but also can greatly protect consumers and help better tax collection.
For the industry, it will help authorised car distributors gain back some market share they were losing to “grey market” importers. With better income, the companies will be able to hire more qualified staff and invest more in training.
Have you seen any action taken by local authorities to ban or crack down on the grey market? How does it impact your business?
Some claim that Cambodia is a free market; I would say that it is a wild market. There are many brand-new imported grey market cars being sold from roadside dealers but so far nothing has been done. Premium Auto Co Ltd has an exclusive importer certificate for BMWs issued by the Ministry of Commerce, but we can still see other people importing new BMWs. Some dealers register cars overseas and drive them for 50-100 kilometres before shipping so they can declare them used and benefit from a lower tax scheme.
The automotive industry is suffering and we badly need good cooperation from the government to regulate the industry better, rather than only seeing taxes on car imports increasing every year.
A car dealership is a multi-million dollar business with long-term commitments, in stark contrast to the roadside dealers who are not adding a lot of value doing business under a structure made of four pillars and a tin roof.
The government last year also increased taxes on imports for brand-new and luxury cars. How has this affected your business, and why did the government do that?
When you know taxes on car imports contribute to a third of the government’s tax collections and that the government is trying to collect more taxes to pay their staff better, it is an easy call to raise the tax on automobiles. I just wished that the government would have done it in a smarter way.
The tax scheme for Cambodia’s car imports always favours secondhand cars, so our country is now a trash can of used, polluting, and unsafe cars, while Vietnam and even Laos are banning secondhand cars in order to build a strong automotive industry and protect consumers from unsafe cars.
Except for Myanmar and Cambodia, every other ASEAN country has banned imports of secondhand cars, so people buy secondhand from those who bought new cars from authorised dealers.
Some well-known luxury brands came to Cambodia last year, including Rolls-Royce. How is that market going, and why is there such an increase?
Thanks to political stability, Cambodians are investing in more stable and long-term businesses. This is absolutely a good sign for the Cambodian economy. With a stable country and tremendous economic growth, we have a good number of ultra-high net worth consumers who fancy owning a Rolls-Royce.
However, I believe that market is limited and would get saturated very quickly. A good sign is that there is a small increase in the volume of new mass market cars being sold. I would say that now, new cars make up a little bit more than 11 per cent of the total cars imported.
What is your outlook for this year?
Because the economy is growing, I am optimistic about car sales this year. However, we are not satisfied at all, because even though our population is double that of Laos, we are still selling less new cars than them. Why do we continue to live in the past, with outdated tax policies favouring secondhand imports? Why don’t we protect consumers and improve road safety by better supporting authorised car dealers?
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