New Car Dealers Cry Foul

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Imported used vehicles parked in the lot of a gray market dealer in Phnom Penh. New car dealers want more taxes to be imposed on used cars. KT/Jonathan Pannetier

Cambodia’s automobile industry expressed strong concerns that the recent government decision to increase the rate of taxation levied on luxury and new cars imported into the Kingdom could seriously jeopardize their already small sales ‒ in a market dominated by imports of used cars of dubious origin ‒ and force many of them to lay off their staff.
Antoine Jeanson, operations director of Automotive Asia (Cambodia) Ltd. ‒ the official importer of Audi cars ‒ said yesterday that though the current sales volume was low for the company’s high-end vehicles, sales would further plunge when the new taxes fully take effect.
Mr. Jeanson added that tax on new cars imported into the country rose by about 20 percent this year. He pointed out that import tax on luxury cars rose from about 122 percent to 137.5 percent this April.
“This will not only affect Audi sales but also the sales of all other brands of new vehicles in other retail outlets,” he said.
Pily Wong, CEO of Hung Hiep (Cambodia) Co., Ltd. ‒ distributor of Mercedes-Benz and Volkswagen ‒ told Khmer Times that after the government tax increase, prices of new cars also went up. That, he said, seriously affected the company’s sales volume.
“If the company cannot generate enough income, we would have no choice but to cut back on our operations by laying off staff. This will affect the country’s job market,” warned Mr. Wong.
Mr. Wong pointed out that the new car market only had a 10 percent share of the country’s automobile sector, dominated by imported used cars in the gray market which offered lower-priced vehicles of dubious origin without any assurance of quality or safety.
“My company finds it very difficult to compete, let alone operate in these circumstances. We want to provide jobs, but it’ll be very hard,” he said.
Mr. Wong argued that the government had a misunderstanding of the luxury car market and because of that imposed negative taxation.
“They [government] think that because new and luxury cars are very expensive, the car companies will make a lot of money. That is untrue,” he said.
“Negative tax, instead, should be imposed on the import of vehicles in the gray market to deter people from buying them because they [the vehicles] are dangerous and pollute the environment,” added Mr. Wong.
Bun Yi, sales and marketing manager of Precision Cars (Cambodia, the official Porsche importer, told Khmer Times that he wanted the government to treat car importers better.
“Why not also increase taxes in the used car market? That would make it a level-playing field and prevent vehicles from entering the gray market,” he said.
Peter Brongers, CEO of BMW Cambodia and president of the Cambodia Automotive Industry Federation (CAIF), said the progressive rise in taxes affects buyers and also poses a big problem for the automotive industry in Cambodia.
“We see demand getting lower and we have to work hard to stimulate demand in a fledgling market,” he said.
According to CAIF, Cambodia imports 40,000 to 50,000 cars a year, of which only 10 percent are brand new. Cambodia and Myanmar, according to the CAIF, are the only two countries in Asean that have not imposed restrictions on imports of used cars.
Mr. Brongers said in the first six months of this year only 3000 new cars were imported.

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