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Kingdom’s rosy economic climate to drive automotive components sector

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Cambodia’s thriving economy continues to woo foreign auto manufacturers. Photo supplied

Kingdom’s rosy economic climate to drive automotive components sector

Cambodia’s auto industry is sizzling as car sales continue to soar. Thanks to the steadfast economic growth and rising consumer spending.

Industry prospects look bright. The Ministry of Public Works and Transport announced that 3.2 million vehicles, including 2.7 million motorcycles, were registered in the Kingdom in 2015 – a 14 percent growth compared to the previous year.

While, in March, the Department of Customs and Excise revealed that Cambodia imported about 6,000 used cars every month.

Economic stability coupled with growing purchasing power, favourable demographics and a culture to compete with neighbours to own vehicles – are driving demand for vehicles at a faster pace in Cambodia – which could even rival its neighbours that boast car manufacturing plants.

Japanese models, mostly Toyota and Lexus are flooding the market (both new and used units), while luxury brands such as BMW, Bentley, Mercedes Benz and Roll Royce are trying to capture the cash-rich elite buyers.

“Cambodia’s car industry’s growth is tremendous and there is a massive change in demand, especially for luxury cars. Cambodia can compete with established players in the region,” Richard Yew, Regional Vice-President of AMB Tarsus Exhibitions Sdn Bhd, which will organise the ‘CamAuto 2018 Expo’ in early November told The Post.

Over 45 international companies will feature auto parts, accessories, service and repair equipment at the exhibition – a clear testimony that Cambodia remains a lucrative market in ASEAN.

The auto components’ sector is still at an ‘infant stage’, says Yew, but foresees a huge potential, largely to be driven by growing demand from the expanding middle class population.

Content image - Phnom Penh Post
Almost all auto parts are imported due to lack of production facilities. Photo supplied

As Cambodia’s economy continues to chalk a healthy seven percent growth this year and a modest 6.8 percent in 2019 and 2020, according to the World Bank, industry experts predict a growth in auto-related businesses – from sales of replacement parts to maintenance and services.

Albeit the automobile sector’s rosy climate, industry observers are still concerned of prevailing weaknesses such as the ‘grey market’ that could stifle Cambodia from developing its home-grown automobile industry and continues to depend on imports.

This will only strain the country’s foreign reserves. Last year, the Kingdom imported auto parts and accessories worth $488 million from Thailand, according to Thailand’s Department of International Trade and Promotion.

“Cambodia imports all vehicles and components from overseas, and there are not enough dealers and distributors in the country, especially for components.

“Investors are more interested in importing and selling products rather than manufacturing locally,” Dr Tan Monivann, Vice President of the Cambodian Chamber of Commerce told The Post.

He said companies should take advantage of the latest government policy, which was announced early this month that offers special tax incentives to small and medium enterprises (SMEs) to expand their businesses.

On October 2, Prime Minister Hun Sen signed a sub-decree on tax incentives for SMEs aimed at stimulating the local manufacturing sector and job creation.

The six core sectors are – agro-industry, food production and processing, manufacturers of waste processing products, tourism, producers of parts and equipment, and research and development of information technology.

But there are other prickly issues plaguing the auto sector, especially the components segment.

According to Kevin Khou, manager of Hong Ly Heng Auto Part, imported counterfeit auto components are hurting the market.

“Counterfeit auto products are destroying the market. This is very unhealthy and we need to push quality products because it also concerns safety issue,” said Khou.

The expo will be held at the Diamond Island Exhibition and Convention Centre in Koh Pich from November 1 to 3, where participants from China, Malaysia, South Korea, Singapore, Thailand, Taiwan and the United Arab Emirates are expected to exhibit their products.

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