Automotive and Electronics Sectors to Receive $2b Cash Boost

Cambodia’s automotive and electronic sectors are in line for a major boost, with more than $2 billion to be invested creating an additional 26,000 new jobs in the next three years
Apartments and condominiums in Phnom Penh, December 25, 2022. Kiripost/Siv Channa
Apartments and condominiums in Phnom Penh, December 25, 2022. Kiripost/Siv Channa

Cambodia has unveiled plans to expand the automotive and electronics sectors in the next three years by pumping more than $2 billion into the industries, generating about 26,000 new jobs.

As part of the plan signed by Prime Minister Hun Sen in February 2022, about $500 million will be invested in the automotive sector, creating an additional 10,000 jobs, and about $1.6 billion into electronics, creating 16,000 jobs.

Female workers are expected to account for about 50 to 60 percent of the newly-created jobs.

Under the plan, the government has identified the automotive and electronics sectors as priority industries to attract investment and create high-skilled and high-paying jobs to contribute to the recovery and resilience of the economy after the Covid-19 pandemic.

“Having this roadmap in place, Cambodia can reap maximum benefits from a window of opportunities emerging from key trends that will shift future value chains, as well as modernize and diversify industrial bases towards new production activities with higher value addition and improved skills and specialization of the Cambodian dexterous workforce,” Hun Sen stated.

According to the Automotive and Electronic Sector Development Roadmap, the plan started in late 2022 and will end in 2025. It comes under the vision of transforming Cambodia into a production hub of automotive and electronic components for export to regional and global markets, starting with the production of simple components and moving up to building a skilled-based and high-value added ecosystem for automotive and electronic component suppliers in the long-term.

Through partnership with the private sector, these sectors have grown rapidly in recent years. Automotive component exports have more than tripled from $60 million in 2015 to $200 million in 2019. Electronics exports have grown at 20 percent, from about $400 million in 2015 to $900 million in 2019.

To achieve this vision, Cambodia’s Automotive and Electronics Sectors Development Roadmap has identified 20 high-impact initiatives in five areas. These are cross-ministerial strategies and coordination, human capital and innovation, infrastructure, trade facilitation, and business and investor friendliness.

Moving forward, the government is committed to developing these sectors further, to drive Cambodia’s economic recovery and long-term growth. It also aims to transform Cambodian industry from labor-intensive to skill-based, and integrate into regional value chains, in line with the Cambodia Industrial Development Policy 2015-2025.

For the automotive sector in the short-term, Cambodia will focus on the on-going opportunity to grow the manufacturing of simpler, more labor-intensive automotive components for export, such as wiring harnesses, seats and simpler electronics and electrical components, while increasing backward linkages for locally assembled two-wheelers.

For the electronics sector, the near-term focus will be on growing Cambodia’s presence in simple components and sub-assembly, such as cables and connectors, and PCB assembly.

Cambodia’s mid-term goal will be to move up the value chain into the manufacturing of more complex automotive components, and higher value-added electronics assembly and design.

In the long-run, Cambodia aims to become an automotive component manufacturing hub, making a wide range of low-to-medium complexity components for export, as well as an integrated electronics production hub, present throughout the value chain in design, components manufacturing, sub-assembly, and final assembly.

As a start, the government has established the Automotive and Electronics Sectors Development Advisory Council that comprises key ministries and agencies, technical vocational education and training institutions, national and international business associations, and investors in these two sectors to collectively discuss and set the direction of development, and prioritization of initiatives, based on the roadmap report.

Automotive Industry’s Growth

The share of electric vehicles (EVs) in the automotive market is poised for rapid growth over the next decade, with EVs expected to make up 18 percent of new car sales globally by 2030, up from two percent in 2020.The less complex assembly process for EVs also allows for the emergence of compact, low-cost EV cars that can potentially raise the trajectory of new car demand in Cambodia and the broader ASEAN region.

Such low-cost EV models, such as the Hong Guang Mini EV, are gaining rapid popularity in China where some new low-cost EVs might cost only $4,500. This has the potential to take off across the region if the right infrastructure to support widespread EV adoption is put in place.

Autonomous vehicle technologies can also unlock the full potential of shared mobility offerings, allowing for shared autonomous vehicles, such as robotaxis, that would make mobility more affordable for many consumers. Costs per passenger for a self-driving taxi are at least a third lower compared to a personal car, and help reduce the environmental impact of mobility.

Currently, Japan is a major source of investment in Cambodia’s automotive sector, while the main export markets include Thailand and Japan.

According to the roadmap, major automotive component manufacturers and assemblers, such as Denso, Yazaki, Sumitomo, and Kyungshin, have been successfully operating in Cambodia through the implementation of a Country “+1” Strategy, where labor-intensive parts are made in Cambodia for transport to assembly plants in the neighboring countries of Thailand or Vietnam.

While locally assembled vehicles account for more than 80 percent of local two-wheeler demand in Cambodia, most of the component parts for these vehicles are currently imported.

Increase Demand for Electronics Sector

The global consumer electronics market is projected to reach $1.4 trillion by 2025, and ASEAN is the third fastest-growing market for electronic devices, with an average annual growth of 6.5 percent, just behind Brazil and India, according to Euromonitor.

With the rising demand of electronics already taking effect globally, this provides an increased opportunity for Cambodia to capture the market of another high growth segment.

Utilization of the latest mobile technologies, such as 5G, means new application methods are expected to emerge. For example, Augmented Reality/Virtual Reality (AR/VR) equipment and autonomous vehicles are already a developing market, driven by the Industry 4.0 revolution.

In view of this, Cambodia is poised to capture the 5G technology market and other new generational technologies in the future.

There is also significant two-wheeler assembly activity in Cambodia, with more than 300,000 motorcycles assembled in 2019, mainly by Honda and Suzuki. This assembly activity feeds high local demand with 540,000 new motorcycle registrations in 2019. This is expected to continue rising to an estimated 1.1 million new motorcycle sales by 2030.

Four-wheeler assembly

Four-wheeler assembly activity is present in Cambodia, but remains limited in scale due to narrow export base, high cost of production, and limited local demand for new cars due to the predominance of used cars in the market.

In spite of all these challenges, companies including Ford, SsangYong, Isuzu, Hyundai, Dongfeng, and Toyota have been establishing assembly industries with the government’s full support.

There are also positive signs for the long-term growth potential of four wheeler assembly in Cambodia in the form of a rising preference for new cars among Cambodians, driven by enhanced purchasing power, and increased consumer emphasis on the after-sales services and vehicle warranties available with new cars.

Cost-competitive workforce

Cambodia has a young and highly cost-competitive workforce ideal for automotive and electronics components manufacturing. About 64 percent of the 16 million population are under 35-years-old and the current minimum wage is at least 10 to 20 percent lower than other major manufacturing hubs in the region.

Adult literacy rates have also improved rapidly, from 78 percent in 2008 to 88 percent in 2019. This is even higher among the young workforce.

In addition, Cambodia also has the advantage of hosting a major textile, garment, footwear and

bags industry, which employs about one million workers whose dexterity and work ethic can be

used for smaller component production in automotive and electronics sectors.

Strategic Location

Cambodia sits in close proximity to fast-growing automotive hubs, less than 400 km from Rayong, Thailand, and less than 100 km from Ho Chi Minh City, Vietnam.

This makes Cambodia an ideal location for manufacturing plants that supply to automotive assembly in Thailand and/or Vietnam. An unofficial translation by CDC 9 reveals that based on this geographical factor, Cambodia is also an ideal location to set up sub-assembly plants and various electronics components manufacturing plants supplying to the electronics manufacturing hubs of the two countries.

Challenges to Cambodia’s automotive and electronics sectors development

There is a need for improvement in electricity infrastructure. Even though the volume of villages receiving electricity significantly increased from 66.6 percent in 2015 to 97.4 percent in 2020 and electricity tariffs have reduced by as much as 30 percent over the past five years, electricity in Cambodia remains slightly more expensive and less stable compared to neighboring countries.

Investments in new and improved electricity infrastructure, as well as the diversification

towards new sources of energy generation, such as solar power and other renewables, are


There is also a need for improvement in transport and logistics infrastructure despite it significantly improving in Cambodia during the last decade. This includes the expansion and improvement of the road network, and the expansion of the deep-sea port in Sihanoukville and launch of a new multi-purpose terminal in 2018.

However, there is still a need to reduce traffic congestion between major industrial areas, such as Phnom Penh and Sihanoukville, and improve connectivity between these industrial areas and export gateways to Thailand and Vietnam.