Cambodia’s tiny luxury car market has lured German company Bayerische Motoren Werke, known to most as BMW, into a contract with Royal Group to open a Phnom Penh showroom next month. Outside the country, the brand is popular in Thailand, Singapore and Malaysia. Peter Brongers, the chief executive officer of BMW Cambodia, hopes to gain a similar foothold in the Kingdom but will have to contend with so-called grey importers, or unauthorised dealers who import and sell domestically. He talks to the Post’s Laura Ma about high-end cars and BMW’s future in the Kingdom.

Why establish a BMW showroom in Cambodia?

The economy is developing, with a growing middle class, which leads to growing demand for quality vehicles. The car industry wasn’t completely new to us. Royal Group started Royal Cambodia Limousine a couple of years ago.

Until recently, it was very difficult to start a dealership in Cambodia. Most cars were imported on the grey market, completely under the radar and some smuggled from other countries and dumped into Cambodia. The car is a bit expensive, ranging from $60,000 upwards, but a BMW after four years, for example, will give you at least 50 per cent of the value that you paid for it. Especially now when you have a showroom that keeps the car in perfect order and with original parts.

What is the size of the current luxury car market?

It’s probably between 1,000 to 2,000 cars per year, which is much smaller than other Southeast Asian countries. Our target is to get a big piece of that, going for 20 to 25 per cent of that market.

There’s been steady growth for luxury cars in the past few years, but no reliable figures because of grey importers. We know how much is imported officially, but not how much is imported unofficially. More official brand presence here will diminish the grey market.

How will you compete with grey importers?

There were never official dealers and importers before. At the moment, buyers only see the price difference between an expensive showroom and a cheaper grey importer. It’s a very short-term decision.

They don’t realise official importers give them long-term service commitment and warranty, keeping their car at very high value. By establishing ourselves as an official dealer, we make a long-term commitment to our customers.

We see more and more BMWs on the roads; I would say 600 to 700. The showroom is big considering the number of cars expected to sell, but we have our eyes on the future, and confidence in the growth of the economy and standard of living. In Singapore and Thailand, BMW is already the best-selling luxury car.

How will BMW compete in a market dominated by SUVs?

We expect a movement away from big four-wheel drives in the coming years, and people wanting to drive smaller cars with less fuel consumption, easier to park and easier to drive, especially in Phnom Penh.

A BMW uses half the fuel a Toyota SUV does; I can save $80 on fuel driving to and from Phnom Penh and Siem Reap. Of course, on dirt roads, an SUV is more comfortable. BMW offers SUV models too. But road conditions are getting better, so there is less need for them.

What are expected sales?

We expect 100 to 150 cars sold in the first year. It’s a relatively small but a growing market, but there’s enough for us to build up presence and be financially healthy. We don’t expect to make a lot of money to start. It’s more important that we create brand awareness and presence, because for us, it is a long-term commitment. We think the showroom itself will draw a lot of people. It’s an impressive building and an impressive brand. People who want to buy a luxury car will definitely go and have a look.

Any inherent challenges in becoming a new contender?

Both our after-sales managers are from Malaysia. These guys each have 15 years of experience working with BMW, and they bring a lot of knowledge. I can hire an entirely local staff, but they wouldn’t be able to do that. It’s a yearlong process of learning the software, computers and the specialties. But we are training local staff to take over the jobs in time. I am sending two new mechanics next week to Malaysia for very intensive courses on parts and updates.

This interview has been edited for length and clarity.