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Kingdom’s road infrastructure pressured by increased car sales

People look at a new Jaguar at a showroom on Phnom Penh’s Russian Boulevard in 2014.
People look at a new Jaguar at a showroom on Phnom Penh’s Russian Boulevard in 2014. Vireak Mai

Kingdom’s road infrastructure pressured by increased car sales

Rising incomes are driving the growth of new and used car sales in the Kingdom, putting pressure on the Kingdom’s limited road infrastructure, an industry specialist said yesterday.

Peter Brongers, president of the Cambodia Automotive Industry Federation (CAIF), said imports of new and used vehicles grew by over 10 per cent last year to 55,000, and can be expected to increase another 10 per cent in the coming year.

“Cambodians are getting wealthier and more and more can afford cars,” he said.

“There is also the fear that if they wait too long the prices will go up.”

Brongers said the rapid growth of car ownership is putting a strain on the country’s road network, which has the government scrambling to raise funds to develop the lagging infrastructure.

The easiest targets are new vehicles sold in licensed dealerships, which are already subject to a high tax rate. This has created an unfair advantage for grey-market used-car dealers, who continue to dominate vehicle sales while paying only a fraction of the taxes of new car dealers.

He said the disparity continues to grow, with existing taxes due to rise later this year.

“The government is currently looking to increase the special car tax from 50 per cent, to 60 per cent,” Brongers noted.

The tax increase, scheduled to go into effect in April, will make it even more difficult for authorised distributors to compete with grey-market dealers, he said.

Brongers suggested that the government distribute the burden of infrastructure upgrades more evenly by switching the emphasis of revenue generation to a road tax, which applies equally to owners of both new and used vehicles.

“The government needs to take action and lower the tax on car imports and replace that income with road tax, like [has been done] in Vietnam,” he said.

Despite the inequities, many of the Kingdom’s authorised car dealerships have been successful in growing their business. Brongers estimated that new car sales grew 7 per cent last year to a total of approximately 4,000 units.

RMA Cambodia, the local distributor of Ford vehicles, had a solid year in 2015, according to its public relations manager, Pao Roatana. He said unit sales increased 30 per cent last year, compared to 2014, which he attributed to the brand’s variety, compatibility with Cambodian road conditions and versatility.

“We have set our presence in Cambodia for the long term and our sales are increasing at a satisfying rate annually,” said Pao. “At the same time, we are expanding to other parts of Cambodia, in addition to our presence in Phnom Penh and Siem Reap, to provide after-sales services to our customers.”

He estimated that sales would grow by at least an additional 30 per cent this year through the company’s expanded network.

Meanwhile, Pily Wong, CEO of Hung Hiep, the local authorised distributor of Volkswagen, attributed his company’s growing sales in new vehicles to more convenient payment options.

“Our marketing contributed to sales,” he said. “We introduced new free-interest loans and this program has been quite successful, because I can see how many people buy their car using our free-interest loan program.”

While Wong declined to give sales figures, he predicted that unit sales would continue to grow in 2016, provided the government takes action to support the industry.

“We have raised issues with the government about fair competition, road safety, environment, and these types of concerns,” he said. “We [also] proposed some solutions to the government.”

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