Carving a niche in luxury cars

How did Hung Hiep Group start importing Mercedes?

We were founded a century ago in China by my great-great-great-grandfather as a commodity trader, and expanded to other countries including Cambodia. We became the largest automotive importer in Cambodia in the 1960s, working with General Motors, Chrysler and Mercedes-Benz among others. In the 1970s, during the Khmer Rouge regime, my family fled to Hong Kong,

where I was born. We re-started the company with the same name, sourcing uniforms, gloves and shoes from China for companies including Mercedes. When peace returned to Cambodia in 1991, Mercedes asked if we would like to resume our business there. My grandfather, who always loved the country, immediately accepted, and that’s how we began distributing Mercedes in Cambodia again.

What kinds of cars are popular in Cambodia?

The biggest models are the most popular, such as the Mercedes-Benz S-Class, which cost about $150,000 each. Our sales vary each year from 20 to 60 units, with 80 per cent going to the S-Class. The bulletproof models are also popular. Big cars are a symbol of power and success − that’s why size matters for our customers.

There’s also a big need for SUVs here. When you travel beyond Phnom Penh, the road conditions are not that good, and flooding also occurs during the rainy season.

With news in recent months of other luxury models like Porsche and BMW entering the distribution market, are you worried?

I don’t think they really are competitors because each brand has its unique positioning. We target people who seek elegance, comfort, safety and advanced engineering. When people buy a BMW they want raw power and sportiness. I see BMW competing more with Porsche than Mercedes.

Even though we were the first distributors of luxury cars here, we never actually had a monopoly because grey-market importers still bring in cars way before they are officially distributed. I prefer to work closely with official importers than grey-market importers because the competition is more level.

Tell us about the grey market, and is it a big problem for you?

Official distributors bring in cars that are custom-built for the country directly from factories. Grey-market importers bring in cars that may be sub-standard or unsafe because the specifications are not 

customised for that country.

For Mercedes-Benz, because the road conditions here can be harsh, our cars have different suspension settings, and have features like shielding below the cars, air-con boosters, special fuel systems and filters that grey-market cars don’t have.

The government does not currently regulate car imports, so they are called “grey market” because they are not technically illegal.

If there were no grey market, our business would be boosted by 50 per cent. It’s a big problem because we invest a lot in the country, like bringing in original spare parts, training our staff and investing in the customer’s buying experience, so we need to have a certain return on investment.

Some customers also think that buying from official distributors is always more expensive, and they don’t do any research before buying grey-market cars.

You were one of the founders of the Cambodia Automotive Industry Federation in September last year. What have been the highlights so far?

The organisation is still very new, so we are still doing things step by step. Our first achievement is that we are organising the first official Phnom Penh International Motor Show on Diamond Island from March 15 to 17. The latest models of each participating distributor will be on display. After this, we will start lobbying the government to regulate the industry.

What future plans does your company have?

Currently, we are the distributor for brands like Lee Kum Kee, Mercury Marine and Kalmar, but about 60 per cent of our business still comes from Mercedes-Benz. We may try to bring in the new A-Class or CLA.

The car market is already quite saturated, so over the next five years we plan to further diversify our portfolio. We will focus more on consumer products, probably in line with what we are already doing, such as in F&B and agriculture.

We have no plans for an assembly plant here at the moment. To have a proper one, you need to make 4,000 units a year, which is a large volume.