- Say it could be first step towards controlling imports quality and quantity
- Say a glut of vehicles; but want govt. to honour promise to re-implement permits
- Acknowledge govt.’s concerns on rupee; accept need for drastic measures
The Ceylon Motor Traders Association (CMTA), an industry Association consisting of local agents for global automotive manufacturers, yesterday proposed to the government to implement a scheme to register vehicle importers to stem excessive vehicle imports into the country.
“By registering the vehicle importer and requiring this importer to have submitted their annual returns to the Registrar of Companies, and pay their dues to the Inland Revenue Department, the consumer is at least to some extent assured that he is buying a vehicle from a credible corporate entity.
The registration of the vehicle importers could be a first step towards controlling the quality and quantity of imports of motor vehicles,” CMTA said in a statement.
At present any individual can import a motor vehicle for his or her personal use or for the purpose of selling it to another party.
As a result, Sri Lankans have better cars—mostly Japanese made, bought at competitive prices—compared to its regional peers, on the back of an appalling public transport system.
Every young man or woman joining the country’s workforce dreams about owning a personal vehicle due to the dismal state of the public transport system.
This scenario however led to an influx of small cars when the government rationalized vehicle import duties based on cubic centimeters (cc) in the last budget. “The increase in imports was led by the growth in small cars below 1,000 cc. From January to August 2018, a staggering 90 percent of the total vehicles imported were of this category,” CMTA said.
However, from the total vehicle imports in 2018 so far, about 86 percent of them were imported through what the CMTA called “grey market”, presumably operated by non-CMTA members.
The Association also in its statement blamed the so-called grey market operators for the recent drastic actions taken by the government to cut vehicle imports into the country and thereby negatively impacting the financial health of its members.
“The CMTA feels that there is a glut of vehicles imported into Sri Lanka and the numbers imported are not justified by the size of the market. Many of these vehicles are imported by individuals or private dealers, who have the capacity to stock large volumes.
It is these volumes of unregulated imports that is necessitating the drastic action by the government, which is in turn having a negative impact on the financial health of the CMTA membership.”
The Association acknowledged the government’s concerns about the depreciation of the rupee against the US dollar and said it accepts the basis on which the government took drastic steps to control the import of vehicles by adopting a mandatory 200 percent cash margin on the establishment of LC’s for import of vehicles, the temporary suspension of permits and the adjustment of Loan to Value (LTV) ratio for vehicle financing.
However, on the same breath, CMTA said it hopes that the government would honour its promise to re-implement concessionary vehicle permits within a year. “….thousands of government employees were planning to purchase a motor vehicle and are now denied this opportunity,” CMTA said.
This statement legitimately questions the genuineness of CMTA’s earlier concerns about a glut of vehicle imports and the sustainability of the local vehicle market. Also, it is not clear as to how CMTA could call the vehicle imports by an individual or a dealer “unregulated” as they import within the current regulatory framework.
In fact, such imports have created healthy competition and affordability in the market place and have given a wider choice to the customer. Importation of vehicles with defects by a few unscrupulous dealers or income tax evasion shouldn’t be reasons to limit the customer’s freedom to choose.
But as pointed out very correctly by the CMTA in their statement, a long-term, transparent and sustainable policy framework should be in place with regards to importation of motor vehicles and the government should not bring in ad-hoc policies that impact the business prospects of both CMTA members and other reconditioned vehicle importers.
Nevertheless, CMTA being a member of the Ceylon Chamber of Commerce (CCC), it is unclear where the country’s oldest business chamber stands despite its outspoken stance in favour of trade liberalization, open markets and freedom of choice.