After years of expansion and tuk-tuk-building expertise, businesman sees downturn hit production
Photo by: SOVANN PHILONG
Workers weld together the latest tuk-tuk to roll off the production line at Loun Vanna’s Phnom Penh factory Tuk Tuk Craft.
LOVE them or hate them, tuk-tuks have become a permanent fixture on Phnom Penh's streets, doing everything from zipping tourists around the city's sites, to carrying chickens and building materials.
Local entrepreneur Loun Vanna says he had a lot to do with the introduction of the three-wheel vehicle to Phnom Penh, and that he learned about them on visits to Vietnam and Thailand.
"I noticed in 1998 that my country was not making any tuk-tuks, so I decided to learn how to make them. When I came home from Vietnam and Thailand, I started a small business with an initial investment of US$10,000," he said.
Loun Vanna, 30, decided to take a risk by closing his construction materials shop and launching Tuk Tuk Craft, rolling out the first vehicles in 2000.
Now, Loun Vanna says his customers come from around the country where the tuk-tuks are used as taxis or for personal transport.
"Tuk-tuks are more popular than motorcycle taxis because they are safe and they can carry cargo," he said.
His business started with only three employees, and now employs 10, paid between $150 and $250 depending on experience.
The factory builds about 10 units per month, which sell for between $500 and $550. Each tuk-tuk takes 3-4 days to finish, and most of the raw materials are imported from Vietnam, including welding machines, dying machines, metal cutters, cast iron machines and chisels.
But even Tuk Tuk Craft is not immune to a global financial meltdown that started thousands of miles away, and Loun Vanna estimates sales have dropped 30 to 40 percent since late 2008.
"In 2007 and 2008 business was good, and we were working nonstop. We had no time for breaks. Cambodia's property market was strong, and many Cambodians had a lot of money from selling their land," he said.
He recalls that that in 2007-08, his company earned between $1,500 and $1,800 per month, but that profits have since dropped below $1,000 per month.
"It is very hard to make a good quality tuk-tuk - we must take time and make them correctly," he said.
Even with sales slumping, Loun Vanna says he plans to borrow money to expand the factory and boost quality. He said that the government and banks could play a part in making small businesses like his grow and succeed. At the top of his list is credit, which he says is too costly in Cambodia.
"Banks should offer fair interest rates," he said, adding that low-cost loans would allow him to expand.
Another priority, he said is cutting Cambodia's prohibitive energy prices, which he says cost his company $250 to $300 per month.
"I want the government to encourage all SMEs in Cambodia - the key is cheaper credit and lower electricity prices," he said.