Not Shying Away From the Price of Auto Luxury

Sok Vanny drives a behemoth Lexus LX 570, the largest and most luxurious of the Japanese brand’s SUVs, which she imported from the US for more than $100,000. She said it makes her proud.

“We had been living with empty hands for four to 10 years since the collapse of the Pol Pot regime,” the 53-year-old explained at her automobile spare parts shop in Phnom Penh, where the immaculately polished vehicle, a V8, was parked.

“We have to buy something that makes us feel proud.”

There is a lot of pride these days in Phnom Penh, where the streets are filled with SUVs that are imported from countries like the US, the United Arab Emirates and Taiwan.

Per capita income in Cambodia was $816.80 a year in 2009, according to the World Bank, but some people make a lot more and are not afraid to let people know it.

“In Cambodia, the people like to show their wealth,” said one luxury car dealer on Norodom Boulevard who asked not to be named for fear of upsetting a colleague.

Figures on car imports were not available yesterday, but statistics from the Ministry of Public Works and Transportation show a steady climb in the number of all cars registered in the country.

In 2009, there were 20,435 vehicles with fewer than nine seats registered with the ministry, up by about 29 percent from the year before. The same figure in 2004 was about half that of 2009.

A sizable chunk of the vehicles on the roads are luxury SUVs, though not all cost as much as Ms Vanny’s LX 570, and many, if not most, are second-hand, unlike hers.

A 2000 model Lexus RX 300, a popular SUV that looks like a cross between a compact SUV and a sedan, was selling for $17,500 recently at a Phnom Penh dealership, for example.

The larger and also-popular Lexus LX 470, which has been replaced by the LX 570, can be had for as little as $32,000 if you settle for a 1999 model, according to one dealership. A 2003 model was offered for $56,000.

But the prices quickly shoot up if you ask for newer models of vehicles that are more commonly featured in hip-hop music videos.

For example: A boxy, 2008-model Hummer H3 could set you back $67,000; a sleek, 2008-model Porsche Cayenne would be a $110,000 splurge; and a brand new, 2010 Range Rover Sport will cost you $120,000 if the buyer does not haggle with the quote one dealer gave.

That same Range Rover Sport has a suggested retail price of about $60,500 in Los Angeles, according to Kelley Blue Book, a vehicle pricing company. That’s a roughly $80,000 difference, which is presumably due in part to Cambodia’s steep vehicle import taxes.

According to tariff rates from the Ministry of Finance that went into effect in January, the 2010 Range Rover is subject to $54,000 in taxes because it has a 5-liter engine. The rate declines with the size of a car’s engine and the year; a 2000 model Lexus RX 300, which has a 3-liter engine, would be subject to a $9,000 duty.

Such a tariff can add quite a lot to a car’s price tag in Cambodia, and puts a cash payment out of reach for many, according to dealers.

“I rarely see someone come buy a luxury car with just cash,” said the dealer on Norodom Boulevard, explaining that such buyers usually exchange an old car, and that some trusted customers make installment payments. For smaller purchases of $20,000 to $30,000, however, he said cash is the common mode of payment.

Chan Sophal, president of the Cambodian Economic Association, said buying a luxury car for many Cambodians is “a status symbol” and is rarely an investment.

“A few people…will look better in luxury cars, so they may have better credibility in their business dealings,” Mr Sophal said. “It may be good for them and they may see it as an investment.”

Buying luxury cars is not unique to Cambodia, as political observer Chea Vannath pointed out. Nevertheless, she described it as a “phenomenon” that can be seen in the light of years of conflict.

“It’s a phenomenon after the post-war era and the excess of wealth from the changing from a state-controlled economy to the free-market economy,” she said.

It could also have something to do with parents who suffered in their own youth, she explained.

“Maybe…I can say that the parents that used to be deprived of anything…because of war or destruction, they kind of spoil their children. They don’t want their children to go through what they’ve been through.”

 

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