Used cars are flooding the market in Cambodia, but car dealerships continue to sell the real deal. We took a trip to BMW’s showroom to find out why new cars win the race every time.
Luxury car sales are going up in Cambodia as the financial elite find new ways to treat themselves. According to the Cambodia Automotive Industry Federation (CAIF), Cambodia’s new car sales have been increasing annually by 8%, and in 2015 sales went up by 15%. CAIF seeks to enhance and protect the goals of the automotive industry, and assist in the improvement of road safety, consumer protection, vehicle safety and driver awareness.
Ly Bun Hay, general manager of Toyota in Cambodia, said he saw sales rise on both new and used cars in 2016.
According to So Dysreyleakhena, an employee at BMW, there is a push to educate Khmer people about the advantages that come with buying a new car. Last year, BMW launched a Facebook campaign entitled #SameSameButBetter with the goal of discouraging people from buying cars from the grey market, an unofficial dealer, or a used car shop.
The ‘grey market’ is a term that refers to a market in which a product is bought or sold outside of the manufacturer’s authorized trading mechanisms.
CAIF tried to stop grey market shops altogether at one point. “We are concerned about safety. First we tried to ban it, but it seems impossible because of the living standards here: not everyone can afford a new car,” said Dysreyleakhena. They are now working on a plan to put a ban on the sale of cars that are more than seven years old.
In Cambodia, 40,000 cars are imported illegally per year, making the grey market ten times larger than the official one, according to CAIF President and CEO of Premium Auto BMW, Peter Brongers.
A 2012 study of used cars dealerships in Phnom Penh by the Cambodian Industrial Development Organization found that 40% of vehicles were insurance write-offs considered not roadworthy in their original country. “We had one case with Audi in which these cars were in the United States at that time of a storm and all the cars flooded, but people have insurance so they made claims and got new cars, while the flooded ones got sent to Cambodia,” said Dysreyleakhena.
The abundance of grey market cars in Cambodia has started to make some future investors weary. According to Antoine Jeanson, chairman of the European Chamber of Commerce’s automotive committee, the main barrier to breaking into the automobile industry is not corruption or difficulties starting a business, but the dominance of used cars.
If you’re doing it right and buying a new car, you might start with a trip to the dealership showroom. We went to BMW in Phnom Penh.
Upon entering the BMW showroom, you notice that the whole place has that new car leather smell. The layout is modern and inviting; white leather lounge chairs offer a place to sit as the staff offers you a coffee from their built-in café bar. It’s all a bit extravagant, but what else would expect from a luxury car dealership? And it’s no surprise, since BMW is backed by one of the largest investment companies in Cambodia, The Royal Group.
According to Khun Chantha, Sales and Marketing Director at Star Auto Cambodia Co., the authorized general distributor of Mercedes Benz, marketing and display design is of utmost importance when doing business. This year nine million dollars was invested in a new Mercedes showroom, hoping to sell 100 new models this year by displaying their cars in a bigger space. It seems dealerships are willing to go big when it comes to displaying the goods.
Although the cars inside the new nine million dollar Mercedes showroom may not all be eco-friendly, the actual building is one of the largest green buildings in Cambodia. About one-third of its electricity will be supplied by solar panels located on the roof of the building.
One company making automobiles with green energy in Phnom Penh is Star 8, who are introducing new products and applications run with green technology. They are on the forefront of green energy in Cambodia, now selling anything from solar powered tuk-tuks to motorbikes and buses at their showroom on Phnom Penh’s Russian Federation Boulevard.
In a country whose roads are not ready to handle heavy car traffic, large cars nevertheless remain among the top sellers. “It’s the Cambodian mindset: they love big bulky cars, like the 517 Lexus,” Dysreyleakhena tells me. “When they have money they buy a big car. But we’re trying to change that mindset since Cambodian roads are small! We tell them to get a BMW – we have the X Drive or the XX.”
One way that many used car owners like to show off is by adding decals to their cars – like a large Lexus logo across a door, ‘VIP’ written on the back windows, or even blue stickers under the door handles. They want to show off the brand name or have their car look straight out of the factory.
The reality is that purchasing a new car is still out of reach for the majority of the Khmer population, but the demand to buy a car, even if it used, is high. “I think cars are better than motorbikes, they protect us from the sun and the rain they are safe. But they are expensive,” said Puthyda Ry, a teacher who hopes to buy a car someday soon.
Official car dealerships are tying to counterbalance the trend by making new cars more accessible to people, even offering special loans without interest for two years. However, until there is a better way to control the quality of grey market cars, official dealerships are saying: be careful.
If you would like to learn more about CAIF and their work in Cambodia head to www.cambodia-automotive.org.
BY: Eduardo Culbeaux