From Phnom Penh - Cars Bikes Trucks

Phnom Penh must be the SUV capital of the world on a per capita basis

We're in Cambodia with a football-sized team of Malaysians, one of whom has been in the automotive business for 40 years and counting.

It's the closing of the Asean summit ? Wednesday was the closing session ? of foreign ministers in Phnom Penh and the capital city looks fresh and energetic. The government buildings are brightly painted and the streets are crowded with traffic. While the cars are typically Japanese, what's interesting is that there are more luxury SUVs here than in Kuala Lumpur or even Kota Kinabalu.

Of the SUV's, there are mostly Toyota LX470's, Range Rover Sports, Range Rover Vogue. Most of the SUVs are imported 2nd hand and a full-spec 2006 Range Rover Vogue ? the real Range Rover ? is about USD50,000 while a new one is USD 208,000.

Cambodia's land transport energy policy is simple, effective and efficient ? world market price. Prices at the service station vary according to the world market price, and local competition. That's why the service stations have variable message boards displaying the price of the three varieties of fuel that are mostly sold in Cambodia.

Fuel prices move in tandem with world prices and there's no subsidy

Cambodian owned Tela chain of fuel stations

There are second-hand Toyota Prius for sale and because Toyota is the top car brand in Cambodiam, a 2007 pre-owned Prius will cost about USD40,000.

The main hybrid model however is the Toyota Camry hybrid which is assembled in Thailand and costs about usd50,000 ? usd60,000).

Because of the high fuel prices, there is a thriving new business of retrofitting the Lexus 470 V8 with LPG systems mostly from Italy and Holland. The Lexus 470 V8 is the top Toyota SUV and boasts a 4.7 litre petrol engine with eight cylinders. Everything's good about this engine -- the sound, the power, the torque ? except the fuel consumption of the engine as all massive engines are notorious for. Many of the Land Rover/Range Rovers are diesel-powered.

The LPG is mostly imported by a Cambodian fuel distribution company, Tela, which sub-distributes it to smaller retailers.

Another in the group is the young scion of an automotive vendor whom we'll call Mr K. The main company is KLSE-listed while the company Mr K's managing is a subsidiary of the family-controlled business.

They have close connections with Japanese component makers and they meet often. From his and his family's relations with their Japanese partners, he said that there are some broad policy issues arising from the Fukushima triple disaster.

While it's not a conspiracy or a published policy, he says that there is a broad segment of the Japanese automotive fraternity who think their future survival from natural disasters is to shift more of their component makers to their overseas production bases, including Thailand, Indonesia and Malaysia.

Where it might get bruising for indigenous component suppliers who don't want to adust is that those Japanese car makers will do all they can to help these vendors. The indigenous vendor might not be able to provide the say, 15 per cent, price cut demanded by the car maker, but the Japanese vendor will bid for the contract at the non-viable cost. This will be based on the understanding that there will be quality changes along the way. This will provide the avenue to slip in an R&D cost uplift so that the vendor can recover costs and finally turn the contract into one with a sustainable profit outcome.

But will an accelerated move of Japanese vendors to Asean shores mean a death knell to the indigenous owners of automotive component makers?

Well, actually not. It's about how the indigenous vendor adjusts to new entrants into the industry. As for Mr K, his family company has engaged with Japanese companies for a long time and he has taken some in as shareholders, even as majority stake holders.

?In Thailand and Indonesia, the Japanese are the majority owners of their production facilities and this encourages them to make new investments,? said Mr K.

?In this kind of situation, it's better to have half the bread than none at all. And the half bread can be more than what you have if you do it by yourself ? just a big fish in a small bowl,? he said.

The bond between Japanese car makers and their supporting vendors is a unique and well-researched one. Basically, it's a transparent relationship where the car maker will nurture the efficiency of its vendors so that there is mutual growth.

What are the implications on the National Automotive Policy? It could emphasis one perception namely, that one can't push on a string. Unlike Indonesia with its 260 million population, strong economic fundamentals and growing middle class, Malaysia doesn't have the size, nor the installed capacity of Thailand, Japan's offshore light pick-up hub for the world.

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