The Cambodia Daily , Tuesday, July 19, 2005

 

Auto Sales Driven By Burgeoning Middle Class

By Michael Cowden and Pin Sisovann
The Cambodia Daily

The motorbike may still be the workhorse of Phnom Penh, but more people are driving around the city’s clogged streets in cars, SUVs and pickups, creating new business opportunities—and new problems—according to government officials, car dealers and drivers.

New and used car dealers report that sales are up, as does Iem Sakmay, general manager of “The Automobile Magazine,” a monthly Khmer-English magazine devoted to cars and car culture.
“More and more people are buying cars,” Iem Sakmay said, especially in Phnom Penh. “And more and more people buy my magazine.”

According to 2004 figures from the Ministry of Transport and Public Works, there were 126,446 registered car-owners in Cambodia. Of these, 15,520 were registered last year, up 62 percent from 9,549 in 2003 and up 171 percent from 5,717 in 1990.

Jean-Boris Roux, country manager for RM Asia Co, said sales are up not only to NGOs, ministries and embassies—the traditional buyers of new cars in Cambodia—but also to individuals.

“We used to be focused on NGOs and ministries,” said Jean-Boris Roux, country manager for RM Asia Co, which sells new Ford Motor Co vehicles. “But the private market is gaining more and more, which is quite interesting.” Roux said pick-ups were his best-selling vehicles, largely because taxes on them—39 percent of sticker price as opposed to up to 116 percent on cars and even higher on SUVs—make them appealing to what some say is an expanding Cambodian middle class. A new Ford Ranger pickup, before tax, is about $11,500, he said. After tax, it is about $16,500. A new Ford Expedition, in contrast, runs about $43,000 before tax and $96,000 after tax, he added.

The high taxes, he said, have led to a boom in smuggling, especially of luxury vehicles, and a burgeoning second-hand car market. He added that some of the second-hand cars are of dubious quality. “You can find some pretty good mechanics who can mold the outside so that it looks pretty good, but you don’t know what’s inside,” Roux warned.

He cited as an example “accident cars,” many of which are imported from the US, sometimes at the price of scrap. Considered beyond repair or not worth repairing by drivers in the US, they are sold to distributors who export them en masse to Cambodia and other developing countries.

The practice is perfectly legal, Roux and other new car dealers said, but it doesn’t make already dangerous Phnom Penh roads any safer.

Michael Lam and Pily Wong, executive directors of Hung Hiep (Cambodia) Co Ltd, a Mercedes Benz and Hyundai dealership, laugh when asked about the more egregious “accident” and second-hand cases that have been brought into the repair shop behind their gleaming new-car showroom on Norodom Boulevard.

They say the owner of a new looking Mercedes once came to the repair shop complaining that his breaks weren’t working. When shocked mechanics confronted the driver with the news that his brakes were in a state of complete failure and asked him how he had been driving, the driver responded that he had simply been using the emergency brake instead.

In another case, the driver of a spotless Mercedes came in reporting engine troubles. When mechanics opened the hood, they found a Lexus engine.

“Customer safety from our angle is very important,” Lam said.

“But unfortunately many people don’t care about it,” Wong added, suggesting that too often people buy new or used cars for image instead of safety and quality.

The dealership’s chief mechanic, Owen Ballantine, said he personally does not drive after seeing several accidents and the battered and bruised state of some cars in his shop.

“Traffic is mad here,” said Ballantine, who recently moved to Cambodia from the United Kingdom. “A lot of cars that come in here, we’re their last destination.”

But Lam agreed that, despite hectic traffic, car ownership was steadily increasing.
“People are buying more cars in Cambodia,” he said. “And this is a good thing because there is a significant increase in the economy.”

Tai Sreng, owner of Tai Sreng Car Spare Part Co, which operates a chain of second-hand car dealerships and repair shops in Phnom Penh, also said sales were up.

He said he now sells almost 200 more cars a month, more than he has in years past.

“People sell their land or they make more from business,” he said. “They buy high-quality second-hand cars.” He said his cars, which range in price from $4,000 to $40,000, are safe. And that includes “accident cars,” he said, which are considered too expensive to repair by insurers in the US, where labor is expensive, but are affordable to fix in Cambodia, where labor is much cheaper.

“Second-hand cars are as safe as new ones,” he claimed, as long as they receive regular maintenance.

But whether their cars are new or second-hand, car owners in Phnom Penh seem to agree that cars are far safer and more pleasant than motorbikes.

“No motorbike thieves, no accidents,” said Nav Sophal when asked why she had purchased a pint-sized Daewoo Tico. “And it doesn’t use much more gasoline [than a motorbike].”

“Driving a car is safe, not so dusty and not so hot,” said Sok Sovanna as he idled with his two young daughters in a used Toyota Corolla on the riverside last week. “When there is a small crash, we don’t get hurt.” But he acknowledged that a new car would be safer than a second-hand one. “I prefer brand new,” he said. “But I don’t have the money.” (Additional reporting by Saing Soenthrith)