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Analysis: Sri Lanka Car Market 2024

God Father | Published on the tue Jan 09, 2024 10:08 am | 1633 Views

The Government of Sri Lanka is planning to lift the restriction on importation of motor vehicles shortly which was barred since 2020-23 during Covid 19 Pandemic followed by the economic crisis as a result of the foreign exchange shortage. 

Investment Advise to Car Owners
Sri Lankan Rupee (LKR) has depreciated against the Japanese (JPY), India (INR) and Europe (EURO) during last 3 years representing the currencies of the largest exporters of used/new Motor vehicles to Sri Lanka.

- Sell your Japanese Cars (Toyota, Honda etc..) instead of selling the Indian Cars before import restriction is lifted
- Hold on to your European Cars (Mercedez, BMW etc,,) before selling Indian Cars (Maruti, Tata, Nano etc..)
- European cars can be sold for higher profits margin and Return on Investment (ROI) in future.


Analysis of Future Car Prices based on Exchange Rate comparison:

"The government is to lift restrictions of vehicle imports partially allowing the motor traders to bring down small cars with engine capacity of 1000 CC and 1300 CC. This decision will be taken in accordance with a comprehensive policy and guidelines in vehicle imports soon, a senior Finance Ministry official said.

Cost of Japanese Vehicles


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Import cost of Japanese Vehicles likely to go up by more than 39% than previous imported cost due to appreciation of JPY/LKR from 1.60 to 2.23 within last 3 years. This is in addition to any changes in Custom Duty and other levies

Cost of Indian Vehicles


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Import cost of Indian Vehicles are likely to go up by more than 58% than previous imported cost due to appreciation of INR from LKR 2.50 to 3.88 within last 3 years. This is in addition to any changes in Custom Duty and other levies. #SriLanka

Cost of European Vehicles


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Import cost of European Vehicles are likely to go up by more than 77% than previous imported cost due to appreciation of EURO from LKR 199 to 353 within last 3 years. This is in addition to any changes in Custom Duty and other levies.

TAXATION ON IMPORTATION OF JAPANESE VEHICLES

TAXATION
- 5% to 35% duty will be imposed.
- 25% tax will be levied on motor vehicles.
- 18% VAT will be charged.
- 5% of the CIF value of the vehicle will be charged as Ports and Airport Levy(PAL). In some cases, PAL may be charged at 0-2.5% of the CIF value of the vehicle.
- 1% to 45% of the CIF value will be charged as ad valorem tax,
- 2% of the cumulative of the (CIF value x 110%), cess, customs duty, and PAL will be charged as Nation Building Tax.

CALCULATION OF CUSTOMS DUTIES
For vehicles categorized under HS headings 8702, 8703, 8704,8705, and 8711, the value is calculated on the basis of two cases:

In the case of a brand new vehicle, the calculation is done on the transacted value.
In case other used vehicles, the value will be calculated on no less than 85% of the manufacturer’s value of a similar brand new vehicle. The local taxes will be excluded during the calculation.

AGE RESTRICTION
Cars: Max. 2 years old
Vans and dual-purpose vehicles: Max. 5 years old
Buses, jeeps, motor cars, ambulances, motorbikes, and all-terrain vehicles: Max. 3 years old
Cabs(single and double), trucks and lorries, and refrigerated trucks: Max. 4 years old

https://unetworld.com/import-regulation/Sri%20Lanka#:~:text=25%25%20tax%20will%20be%20levied,CIF%20value%20of%20the%20vehicle.

IMPORT RESTRICTION
The import ban on vehicles has been in place since 2020, a decision rolled out by the government to prevent the island nation from further losing foreign exchange. The move to relax small vehicle imports comes in the wake of limited revenue collection by Sri Lanka Customs, approximately falling short by Rs.300 billion-Rs.450 billion, on the backdrop of stringent revenue targets set by the International Monetary Fund. 

Before the ban on vehicle imports, Sri Lanka had new vehicle registrations of over 350,000 annually. The majority was dominated by motorcycles, with over 280,000 registrations, followed by cars, with over 35,000 new registrations.  New registrations of small car imports of less than 1,000CC amounted to 26,962 in 2019 and 64,195 in 2018.

SRI LANKA: VEHICLE POPULATION

Sri Lanka: Total Vehicle Population (2012-2023)

Sri Lanka vehicle population is a good indication to determine how country has used its foreign reserves to import vehicles for passenger transport and utility purposes instead of industrial or agricultural usage. 


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Sri Lanka: Total Vehicle Population as at September 2023  


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Source: Department of Motor Traffic
https://dmt.gov.lk/images/2023/total_population/Vehicle_Population_2010-2023.pdf

Sri Lanka New Car Registration during last 25 Years


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Car Registrations in Sri Lanka decreased to 108 Units in November from 129 Units in October of 2023. Car Registrations in Sri Lanka averaged 2191.31 Units from 1997 until 2023, reaching an all time high of 15017.00 Units in September of 2015 and a record low of 41.00 Units in November of 2022. source: Central Bank of Sri Lanka

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