Cambodia Only Demands 2,000 New Cars Currently, But Its Auto Industry Is Projected To Grow Fast When Southeast Asia Becomes One Economic Entity

Cambodia currently has a tiny auto market with annual new car demands approaching about 2,000 units and used cars demand reaching up to 20,000 units. Now, the country is hoping to lure global automakers from neighboring Thailand and Vietnam with a young, cheap labor force, especially once Southeast Asia integrates into a single economic entity in 2015, allowing goods to flow more freely within the bloc.

To put the numbers into perspective, in 2012, China manufactured 19.27 million units, and excluding commercial vehicles, Chinese consumers purchased 15.5 million passenger cars and light trucks last year.

Foreign automakers and industry experts are optimistic about the Cambodian market despite its small size. General Motors Co. (NYSE:GM), Hyundai Motor Co. (005380.KS), and UK-based BIW automotive company all have operations in the country, the Global Times noted in a pickup of a report by Xinhua.

"Cambodian automotive market is small, but growing rapidly," Tong Norm, chairman of United Auto Trading, said earlier this year. The group is the exclusive distributor of GM’s Chevrolet cars, which officially launched its first Cambodian dealership in May.

The industry will expand even faster when Cambodia is integrated into the Association of Southeast Asian Nations Economic Community in 2015, which will bring a free flow of goods within the bloc and leverage the country's competitive advantage as a low-cost manufacturer, Cham Prasidh, Cambodia's commerce minister, said.

“Companies can import tires from Malaysia, the mirrors from Indonesia, or other spare parts from other countries and then assemble them in Cambodia where the production cost is cheaper,” Prasidh said at the First Phnom Penh International Motor Show, which was held in March in the country’s capital.

“Many Japanese-base companies in Thailand and Vietnam are considering coming to Cambodia,” he said, according to the Phnom Penh Post.

South Korea-based Hyundai has been assembling vehicles in Cambodia for the domestic market for the past two years and is interested in increasing production to meet the rising demand. A company representative said it aims to reach 800 units in 2013.

Sok Chenda Sophea, secretary-general of the Council for the Development of Cambodia, said the government is actively fostering the growth of the auto industry in an effort to boost manufacturing in the automotive and electronics sectors.

“With the industrial policy in hand, I believe that all the challenges that the private sector is facing will be resolved,” Sophea said.