Logo of Phnom Penh Post newspaper Phnom Penh Post - Vehicle-part exports rocket 43.5% on-year in first quarter

Vehicle-part exports rocket 43.5% on-year in first quarter

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Officials visit a local vehicle-parts factory. PHOTO SUPPLIED

Vehicle-part exports rocket 43.5% on-year in first quarter

Cambodia exported “vehicle parts” worth $11.272 million in the first quarter of 2023, ended March 31, registering an increase of 43.52 per cent compared to the $7.854 million booked in the same period last year, the Ministry of Commerce reported, citing Customs (GDCE) statistics.

On the other hand, exports of the broader “vehicles other than railway or tramway rolling-stock, and parts and accessories thereof” category – corresponding to Chapter 87 of the Harmonised System (HS) – were to the tune of $186.134 million in the same three-month period, down 26.02 per cent year-on-year and down nearly 25.3 per cent quarter-on-quarter, provisional GDCE figures show.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, told The Post on May 3 that the Kingdom’s general export capacity has grown by leaps and bounds, which he credited to attractive reforms to the legal investment framework, preferential tariff treatment from major markets, and a steady rise in investment across the spectrum of sectors.

Although the Cambodian vehicle-parts industry is not as well-known as its garment, footwear and travel goods counterparts, the year-on-year increase in export value suggests that it may very well be a sunrise industry, he opined.

Vanak noted that vehicle parts factories can be classified as either medium- or heavy-industry units; require skilled workers as well as the use of advanced technologies and modern methods; and yield a host of economic benefits.

“Favourable internal and external conditions have led to a growing number of vehicle-parts factories operating in Cambodia.

“Given what Cambodia has now, I’m optimistic that the number of vehicle parts manufacturers and the money derived from the export of the aforementioned products will increase further,” he said, pointing out that these components could also be used domestically in vehicle assembly and repair.

“Having more vehicle-parts factories will also help convince more car manufacturers or assemblers to open factories in Cambodia,” he said, suggesting that these plants could use locally-made components.

Be that as it may, Vanak pointed out that importers also spend tonnes of money to bring in foreign vehicle parts to meet domestic demand.

The Cambodian motor vehicle assembly industry has also grown significantly in recent years, with models from brands such as Ford, Hyundai, Isuzu, Kia and SsangYong being put together in the Kingdom.

On March 29, K (Cambodia) Co Ltd formally inaugurated an Isuzu vehicle assembly plant in eastern Kampong Speu province. K Cambodia is the sole firm authorised by Japan’s Isuzu Motors Ltd to import CKD (complete knock-down) parts for the assembly and distribution of Isuzu vehicles in the Kingdom, as noted by vice-head Huy Chea at the accompanying ceremony.

This was the latest in a recent series of inaugurations of such factories in the Kingdom, which includes the likes of RMA (Cambodia) Plc – the exclusive distributor of Ford models in the Kingdom – which in June opened a $21 million vehicle assembly plant in Pursat province.

Presiding over the March 29 event, Council for the Development of Cambodia (CDC) secretary-general Sok Chenda Sophea remarked that the decision to invest in the facility is indicative of the company’s trust in the government in maintaining peace as well as political and macroeconomic stability.

He stressed that the Kingdom also produces vehicle parts such as wiring harnesses, seats, electrical systems and motors.

Chenda Sophea also mentioned the recently published “Cambodia’s Automotive and Electronics Sectors Development Roadmap”, which was compiled by the CDC.

Through this framework, the government hopes to “expand the export[s] of [the] automotive sector by around $500 million and of the electronics sector by around $1.6 billion while generating around 10,000 new jobs in the automotive sector and around 16,000 new jobs in the electronics sector by 2027”, according to the roadmap.

According to the roadmap, automotive component exports rocketed more than threefold to $200 million in 2019, from $60 million in 2015, while electronics exports stood at $900 million in 2019 compared to $400 million in 2015, representing a compound annual growth rate (CAGR) of 20 per cent.

In a recent interview with The Post, Federation of Associations for Small and Medium Enterprises of Cambodia (FASMEC) president Te Taingpor suggested that energy rates be reduced to levels similar to those in nearby countries to further increase the investment appeal of the Kingdom, remarking that high fuel and electricity prices have significantly driven up production costs.

He added that keeping fuel and electricity prices from rising will trim production costs, better enabling: raw material processing, especially among small- and medium-sized enterprises (SME), as well as increases in domestic production capacity and exports.

“When fuel prices – in addition to electricity rates – are stable and low, foreign investors will see opportunities,” he said, putting fuel and electricity prices among the main three expenses in the production process, along with raw materials and wages on labour.

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