Cars and the Automotive Sector in CambodiaOctober 10, 2012
If you’ve been riding or driving to work recently, you’ve probably thought to yourself that the traffic in Phnom Penh just keeps getting worse. You would be correct in this assumption. Every time that ostentatious SUV driven by a Mao-suited Bong Thom almost runs you down, or that parked S-Class owned by that dickhead expat from the business community prevents you from accessing your favorite bar, you will shake your fist and boil with anger, which is a perfectly normal reaction. But you know what? It is only going to get worse.
The size of the Cambodian car and bike market:
When UNTAC was on the scene, annual motorbike sales were only approximately 22,000 in a country where there were only about 50,000 bikes. By 2011, 120,000 bikes were sold which swelled the total bike population to over 600,000. And that’s a lot of Dreams, Icons, Finos and Scoopys.
New bike sales continue to grow year on year, but in a sign of the times, the standards, range and brands available are growing too. An authorized dealership selling Vietnamese manufactured Vespas have already entered the market. Grey market Harleys, Triumphs and Ninjas are becoming more and more ubiquitous – there is even talk of Ducati entering the market…
But bikes alone, do not make the traffic increase. 2012 has been one for the ages in terms of car imports and registrations. According to the Ministry of Commerce, in the first six-months of 2012, vehicle imports are up by almost 45 per cent, compared to the equivalent period in 2011. The Phnom Penh Post quotes figures of over 486,000 vehicles imported between January and June of this year, with a total value of USD$239,000,000. The same period in 2011? Approximately 335,000 vehicles with a total value of about USD$175,000,000.
Now keep in mind that not all these ‘vehicles’ are passenger vehicles. In fact, by volume, passenger vehicles account for only 28 per cent of total vehicle imports. The rest are tractors, trucks, buses and ‘special vehicles’ such as fire engines and ambulances.
However, the Ministry of Transport estimates there are somewhere in the vicinity of 375,000 registered passenger vehicles in Cambodia. New cars are being registered at a rate of 80 per day and most of these are, of course, in Phnom Penh. Makes you think twice about heading down Monivong Boulevard at 5:30pm on Friday night, doesn’t it?
What are people buying?
Toyota. Toyota. Toyota. They are everywhere, and if you have been shopping around, you will have noticed that resale values for the Toyota family of products, that being Toyota, Lexus and Scion, are exorbitant compared to resale values in the West. A bog standard 1997 Camry, for example, will rarely fetch less than $7000 through any sales medium, grey market or private. Why is this?
Partially, this is because Toyota has a deserved reputation of manufacturing sturdy, reliable, high quality products. Parts are cheap and maintenance is reasonably straight forward. Ask any Khmer, and you will get a response along these lines. Toyotas are also in hot demand because ‘Brand Japan’ carries a lot of weight around these parts. Owning a Toyota over a Hyundai, Kia or Great Wall is a powerful status symbol.
What percentage of cars in Cambodia are Toyotas? Well, if you were thinking that every second car on Cambodian roads is a Toyota, you are basically correct. 40 per cent of the total number of passenger vehicles cruising around here are Toyotas or Scion product lines. Most are Camrys, Corollas, Land Cruisers, 4-Runners, Hiluxes and Rav-4s of any age. Given the poorly maintained roads and low-quality fuel, it is not hard to see why.
Cambodia’s own ‘economic miracle’ and the explosion of brand-new luxury vehicles:
Cambodia has averaged 10 per cent GDP growth over the last 10 years. Admittedly, this growth was coming off a fairly small base but it seems that the natural rate over the next few years will be between 6-7 per cent.
FDI is up, exports are up and wealth and prosperity arrived with a vengeance over that period. How that wealth has arrived at and how it was/is distributed is another question, of course.
One staggering figure is that there is USD$6 billion in deposits are now being held by Cambodian banks. Furthermore, these deposits are held by only 2.5 per cent of the country’s population. And this is not money outlaid on houses. Not on cars. Not on boats. Not in off-shore accounts. This refers only to deposits in Cambodian banks.
If Khmers are not putting their money to work, then how are they spending their savings? Well perhaps it is a reflection of the immaturity of the Cambodian property and financial markets, but cars are undoubtedly one of the primary means to spend one’s savings. Indeed, a car is often the first major purchase for middle and upper class Khmers. Cars bring face. Cars are sexy. Cars are visible. You can’t very well drive around with all your friends in your house, can you?
But not all cars are created equal. Every expat knows the car of choice for the aspirational classes. They are big, brash and pack huge stickers which scream their brand loud and proud at stopped perpendicular traffic. They are the Lexus brigade. 20 per cent of ALL cars on Cambodian roads are a Lexus of some type. The take-up of Lexus vehicles in Cambodia has got to be, pound for pound, the highest of anywhere in the world. If Albania is Mercedes Benz, then Cambodia is Lexus.
Admittedly, most of the Lexus’s on the roads are RX 300/330s and not the larger LX 470’s which are an oft targeted symbol of derision for being ostentatious, road hogging and aggressively driven. But consider this, the super wealthy who are responsible for buying up the brand-new Lexus LX 570s as well as Range Rovers, BMWs, S-Classes and increasingly even Rolls-Royce and Bentleys are doing so at a rate of 500 per year and that trend is rising. Brand-new luxury vehicles are pouring in from the US, the Middle East and Europe. Of course and unfortunately, most of these large, shiny, new luxury vehicles are destined to sit in Phnom Penh traffic.
So, if you regularly battle down Russian Boulevard, or Norodom, or Mao Tse Tung or any other major thoroughfare on the way home or to the bar, you may want to continue to ride your bike – or trade in your car. Whilst the rain may be inconvenient during these recent months, you can be assured that you will be at the bar at least 30 minutes before me.