A Change of Guard

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Wednesday, 27 April 2016

CAIF hopes to put a dent in used auto market

Two men walk through a Ford dealership in Phnom Penh in 2013.
Two men walk through a Ford dealership in Phnom Penh in 2013. Vireak Mai

CAIF hopes to put a dent in used auto market
Tue, 26 April 2016 ppp
Kali Kotoski

The independent industry body representing Cambodia’s authorised automobile distributors launched a consumer awareness campaign yesterday aimed at informing the public of the risks of purchasing second-hand cars on the local grey market, which it said reduces government tax revenue while flooding the streets with predominately American imports that void dealership warranty and service guarantees.

The Cambodia Automotive Industry Federation (CAIF), which consists of more than 20 authorised automobile dealers, will use social media to disseminate its new “Same Same But Better” campaign, which warns about the dangers of buying cars that have not been sold through official distributors.

“As the automotive industry body composed of authorised dealers, it is our mission to protect consumers,” CAIF president Peter Brongers said. “That is the reason behind the launch of our very first awareness campaign.”

According to Brongers, of the 45,000 cars imported last year, only 4,500 cars went to authorised dealers. The remaining 40,000 were sold in Cambodia’s grey market, which is estimated to be the largest in the 10-member ASEAN economic bloc.

Pily Wong, CEO of Hung Hiep, the authorised distributor of Volkswagen in Cambodia, said the goal of the campaign was to change the mindset of consumers in order to purchase “safe, reliable and economic cars.”

“When you buy from a second-hand dealer, you don’t really know what you are getting,” he said. “We have proof that a lot of the cars coming in from America have been damaged by natural disasters and haven’t been checked for safety.”

He added that second-hand imported vehicles are not calibrated for Cambodia’s low-quality petrol, or tuned for adequate suspension on the country’s rough roads.

While Wong said the mission of the campaign was for consumer protection, it also aims to level the playing field in the automotive sector. He explained that while authorised distributors were subject to a staggeringly high 137 per cent cumulative tax on legal imports, grey market dealers routinely avoid many taxes and as such can offer vehicles at cheaper prices that appeal to budget-conscious consumers.

“The grey market has made the government dependent on tax collection of legally imported cars,” Wong said, adding that if second-hand imports were banned, the government would be able to generate more revenue from official dealers.

According to Brongers, Cambodia and Myanmar are the only two countries in ASEAN that have not imposed restrictions on imports of used cars. He stressed that a ban on second-hand car imports would not limit prospective buyers, while making new cars more affordable to the general public.

“A full ban wouldn’t hurt,” he said. “We already have 250,000 cars in Cambodia and these will continue to be sold.”

He added that the high taxes placed on legal imports was forcing authorised distributors to focus on the high-end segment of the market rather than importing models better matched for the mass market.

“Cambodia’s roads are clogged with big cars that are not suited for this country,” Brongers said. “If you look at the streets of Bangkok or Saigon, you see that they have a lot more affordable and smaller options.”

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