By Uditha Jayasinghe
Alarm bells are ringing for Sri Lanka’s vehicle importers after numbers plummeted by 20.8 per cent in April, motivating the industry to demand talks with the Government, an industry official said yesterday.
Ceylon Motor Traders Association Chairman Thilak Karunaratne told the Daily FT that the industry was worried over the increasingly lower demand driven by high taxes, interest rates, expenses and a credit crunch.
The association has requested a meeting to discuss the issues with Treasury Secretary Dr. P.B. Jayasundera but an appointment given for 7 June had been subsequently cancelled with no new date given.
However, Karunaratne has asked for another appointment to discuss industry challenges, even though it is yet to be granted.
The Central Bank in its April External Performance report noted: “Expenditure on consumer goods imports declined by 12.9 per cent in April 2012, reflecting a decline in expenditure on most food and non-food consumer good categories. With respect to imports of non-food consumer goods, expenditure on personal motor vehicle imports declined by 20.8 per cent in April 2012 to US$ 56 million.”
Listing out industry woes, Karunaratne pointed out that the industry is “affected from all corners” due to “ad hoc” tax increases by the Government that came into force in April. He recalled that even smaller cars were slapped with heavy tax increases that put them beyond the reach of average income earners and depleted the market severely.
“A 200 per cent tax increase is too high for most vehicles,” he said, adding that the depreciation of the rupee was pushing customers to be wary. According to Reuters, since February the rupee has dropped 13.6 per cent, resulting in car prices becoming unreachable.
Mandatory Government regulation for all vehicle importers to use the Hambantota Port has also caused waves with Karunaratne stating that each vehicle costs around Rs. 40,000 extra.
“Importers cannot absorb all these costs, but if they don’t, then there will be no buyers. Many of our members try to take on around 50% of the additional costs from taxes and other expenses, but it is impossible not to pass on at least some of it to buyers.”
High interest rates of around 20% are also not helping matters, charged Karunaratne, emphasising that the Government was also discouraging consumption-based loans, resulting in a credit crunch. Topping all these issues is the recent move to establish a licensing system for vehicle importers.
It was reported that a scheme has been proposed to issue licenses for the purpose of vehicle imports ranging from a Rs. 5 million fee for small scale importers of reconditioned vehicles and Rs. 10 million for large-scale firms as well as Rs. 25 million for those who import brand new cars.
Even though the Finance Ministry has insisted that this will promote standards, Karunaratne termed it “impossible” to pay the rates proposed by the Government. “This is a vicious cycle that is leaving the industry stagnant. People are not ordering cars and it will take a long time to recover.”