Search form

Login - Register | FOLLOW US ON

Logo of Phnom Penh Post newspaper Phnom Penh Post - Runing on taxes, image and service

Runing on taxes, image and service

Overall automobile sales are expected to grow an average of between ten and 20 percent

per year over the next five years, industry executives believe. But due to concerns

of political stability and possible tax changes, most predict that segments of the

market will likely grow unevenly.

Distributors predict over the longer-term that the market will see rapid growth in

new cars as opposed to used cars and passenger cars as opposed to utility vehicles.

While offering a broad picture of their market expectations, dealers decline to provide

target figures for their specific companies.

Cambodia Astra Motor Co Ltd, sole distributor of Rover and Land Rover and sole importer

of BMW, expects fluctuations in sales over the next four years - including a dramatic

surge of 50 percent following the upcoming elections - according to general manager

Peter Elliott. He expects that overall sales will have increased by ten then 25 percent

in the two years leading up to elections and will drop back to ten percent by the

year 2000.

Similarly, Jeep expects 30-40 percent growth in sales through 2000, while Mercedes-Benz

foresees the market expanding 20 percent over the next few years.

Phnom Penh-based consulting firm, IMIC, provides a more conservative estimate. General

Manager Anthony Ainsworth believes that car sales most likely will not grow more

rapidly than gas sales which are expected to grow ten percent per year.

Tax Exemptions Boost Auto Sales

Cambodia's import tariffs directly affect car sales. The Kingdom levies a three-tiered

tax structure on the sector: 40 percent of the purchase price for cars with engines

smaller than two liters; 90 percent for vehicles with 2.01 to three-liter engines

and 120 percent for those with engines larger than 3.01 liters. In addition, a four

percent consumption tax is added to the total cost.

Certain types of buyers - select government officials, foreign investors, embassies,

and NGOs - are granted tax-exempt status. Demand has been consistent in the tax-free

segment of the market. For example, 80 percent of Jeep sales are tax-free, says William

Middlemiss, Division Manager of Jeep-Chrysler.

While this tax-free segment provides a steady source of sales, its potential for

future growth appears limited. Therefore, companies are looking to the tax-paying

segment to drive future growth.

New vs. Used Car Sales

Most interviewed agree that used cars comprise about 80 percent of cars in the Kingdom.

But estimates of the aggregate size of the automotive market, both new and used,

vary widely. For example, Jeep's Middlemiss believes the total size is 25,000-40,000

cars, while IMIC's Ainsworth argues that 75,000 is a more accurate figure.

Over the next five years, new car sales will likely comprise an increasing share

of the total market. "In five to ten years, the people with second-hand cars

will begin to buy new cars," explains Tomonori Umehara, President of TTHK Co

Ltd, a subsidiary of Toyota Tsusho Corp. Until then, he says, four-wheel-drives will

be the mainstay of new car sales.

The Heavyweights: Mercedes vs. BMW

While also driven by taxes, future growth in the executive car segment - primarily

comprised of Mercedes, BMW, and Lexus - runs on image and quality. According to up-market

distributors, the primary buyers of high-end cars are foreign investors, wealthy

Cambodians, government officials, and military officers.

Within this sub-market Mercedes holds a 90-95 percent share for top models and 60-70

percent for other models, according to Chiv. "Mercedes has a higher image than

BMW, especially in Asian countries," he says, adding that the most popular marque

the "320 S Class" which retails from $80,000- 90,000 (plus 120 percent


Peter Elliott, General Manager of Cambodia Astra Motor, remains optimistic about

the prospects of BMW in Cambodia. "BMW is more popular than Mercedes throughout

Asia in sales," he argues.

Prices of a BMW range from $27,000 (plus 40 percent tax) to $90,000 (plus 120 percent

tax). Elliott predicts that the "5 Series" will replace the "3 Series"

to become the most popular BMW in the Kingdom. The "5 Series" models cost

between about $35,000 (plus 40 percent tax) to $60,000 (plus 120 percent tax).

While not a huge segment, children of wealthy Cambodians represent a growing market

for executive cars, Elliott notes. In their late-teens to early-20s, they are "car

crazy" and change cars once or twice a year, he says.

Service Centers Important for Future Market Share

The plethora of Cambodia's unauthorized repair shops affect the after-market profitability

of authorized service centers and, indirectly, new car sales.

Unauthorized repair shops can afford to charge less because their staff are not as

well trained and because they circumvent the 50 percent import duty on spare parts,

industry executives claim.

Chiv explains that this holds true even for the upscale market. "[Our customers]

can afford Mercedes, but many try to save money on repairs," he says. "Roadside

repair shops usually fix the car improperly which may damage other parts. Then they

have to get their car towed in to our service center and it costs more in the end

than if they went to our workshop in the beginning."

Many companies are upgrading their existing service centers and counting on them

to ensure satisfied and loyal customers. Cambodia Astra Motor Co Ltd, for example,

plans to open a new sales, service, and body repair facility in Phnom Penh for Rover,

Land Rover and BMW.

"After-service will be important to maintain market share," says Toyota's

Umehara. "If we satisfy our new car owners through service then we will get

more customers."



Please, login or register to post a comment

Latest Video

Turkish Embassy calls for closure of Zaman schools

With an attempted coup against the government of President Recep Erdogan quashed only days ago and more than 7,000 alleged conspirators now under arrest, the Turkish ambassador to Cambodia yesterday pressed the govern

CNRP lawmakers beaten

Two opposition lawmakers, Nhay Chamroeun and Kong Sakphea were beaten unconscious during protests in Phnom Penh, as over a thousand protesters descended upon the National Assembly.

Student authors discuss "The Cambodian Economy"

Student authors discuss "The Cambodian Economy"

Students at Phnom Penh's Liger Learning Center have written and published a new book, "The Cambodian Economy".