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
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