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Steering away from the grey market

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Antoine Jeanson, Operations Director of Automotive Asia (Cambodia), stands next to an Audi TT at the company’s showroom in Phnom Penh yesterday. Heng Chivoan

Steering away from the grey market

While the Kingdom’s automotive sector has seen the entry of authorised dealerships, grey market dealers still make up the bulk of car sales.

Dealerships are trying to lure prospective customers to purchase new vehicles, but grey market used cars still enjoy a substantial cost advantage given the lower tariffs paid to import second-hand vehicles.

The Post’s Ananth Baliga spoke to Antoine Jeanson, operations manager at Automotive Asia (Cambodia), the official distributor of Audi in the Kingdom, to discuss the competition between authorised and grey market car dealers, and consumer trends in the automotive sector.

How has an increase in authorised car dealerships affected the market in Cambodia?

It is now possible for Cambodian buyers to purchase their vehicles through official importer-dealer networks.

The drift away from an informal market – dominated by used cars of unknown origin and service history – to an official new car market is beneficial and likely to continue. In the case of Audi Phnom Penh, we provide a two-year warranty with unlimited mileage during that period to our customers.

We also provide genuine spare parts and service performed by trained technicians as per AUDI AG standards using the official workshop equipment and tools.

Which segments in the auto sector have seen growth recently?

Unfortunately, import and registration data is not public and we do not have a clear vision of the market.

But looking at our sales and at the vehicles on the road, we can say that when you exclude pick-up vehicles, sport utility vehicles (SUVs) are by far the most dynamic segment.

We estimate the premium segment at 10 per cent of the passenger cars market in Cambodia.

How are official car sales compared to other grey market importers, and are authorised dealership able to compete?

The so-called grey market accounts for about 90 per cent of the total car market.

We hope to see that changing but as long term investors in a viable business model for customers and automotive professionals on the long run, we need the government to play their regulatory role.

The current competition from the grey market is unfair. At Audi, all of our cars are declared to the customs at their transaction value and as a company we pay all of our taxes as per the Cambodian regulations.

On the other hand, grey importers are able to offer low prices by escaping taxation in many ways, as well as not offering any sort of customer protection or after sales service.

What are your views on the tariffs imposed on car imports, especially luxury vehicles?

The issue is not the import tariff itself but rather to make sure everyone it is applied uniformly no matter who the officer checking the validity of the invoice, the time of the year or the port of entry. Other countries have high taxation and still a dynamic automobile industry attracting foreign investments and contributing to the local economy.

As of today, Cambodia is the last country in ASEAN with no restriction on car imports. Anyone can import anything without being responsible in any way.

Apart from competing with the grey market, is competition increasing in the official market as well?
In recent years we have seen many new automobile brands opening official dealerships. Yet, one of the best performing brands, Lexus, still has no official representation in Cambodia.

This shows that there’s still a long way to go to improve the auto industry.

Given that many grey market dealers indulge in questionable practices, how difficult is it to convince customers to purchase an authorised, official vehicle?

Although the market share of grey dealers is still huge, the fact that many buyers experience scams when dealing with the grey market brings to light the risk of purchasing a vehicle from these shops.

We have seen that almost all of them have had their mileage tampered with, meaning the dashboard was showing a mileage lower by five to 10 times the actual kilometre reading.

A sizeable number of these vehicles also had severe damage, affecting their body structure and making them a risk to safety. When our customers face these issues, it’s not hard to convince them that our offer is a lot better.

How does Audi see the market evolving in the coming years?

If the Cambodian government puts in place regulations protecting consumers, the environment and foreign investment, we are likely to have a successful market ahead of us. ASEAN is booming and the automobile industry with it.

Do you see any changes in your car offerings in reaction to these changes?
At first, we started with the luxury sedan Audi A8L and our seven-seat SUV – the Audi Q7 - to establish the brand in the premium segment. After one year, it’s about time for the sporty Audi TT coupe, Audi 6 ultra sedan and A7 sportback.

This article has been edited for length and clarity.


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