Parallel vehicle importers eye government tenders

• Call for brand new status for zero mileage parallel vehicle imports
• Allege agents enjoying a monopoly on government tenders

By Nishel Fernando

Sri Lanka’s parallel vehicle importers recently urged the government to provide ‘brand new’ status for vehicle imports with zero mileage by them in order to pursue government tenders.

Addressing a media briefing last Friday, the Vehicle Importers Association of Sri Lanka (VIASL), Chairman Ranjan Peiris appealed to the government to do away with the current monopoly enjoyed by franchise vehicle agents in bidding for government tenders. Peiris noted that when importing a vehicle to Sri Lanka, the brand new status was only given to the vehicles imported through  these franchise dealers and even when a parallel vehicle importer imported a vehicle with a zero mileage, the vehicle cannot be registered as a brand new vehicle due to prevailing regulations.

“Agents have unfair advantages as new vehicles imported by parallel importers do not receive the applicable brand new status even though the vehicle is brand new. This is detrimental to their ability to pursue government tenders,” he said.

Hence, VIASL urged the authorities to look into this matter pointing out that these agents enjoy a tender monopoly and the situation results in the government being forced to buy certain vehicles at a higher price resulting in the wastage of public money.

“Given the monopoly, the franchise dealers can hike the price of vehicles. However, if the bids are open to us, the government can get the vehicles at a competitive price,” emphasised VIASL, Secretary Arosha Rodrigo.

Peiris noted that there are a large number of parallel importers compared to a dozen of franchise dealers, hence, the government would benefit from the competition.
“If there are twenty franchise dealers, there are 1, 500-2, 000 parallel importers,” he said.

Peiris noted that VIASL will submit their suggestions for the 2019 budget proposals next month.

Rodrigo charged that the agents are lobbying the government to replace the unit rate-based duty scheme with the “out-dated” brake horse power (BHP) based duty scheme. He warned that this BHP-based duty scheme could be easily manipulated, as it is impractical and complicated.

VIASL called introduction of the unit rate-based duty scheme in the last budget was a good move as it restricts revenue leakages to the government.

However, with the introduction of the unit rate-based duty, the vehicle imports have increased significantly and the Central Bank Governor also recently expressed his concerns over the increasing vehicle imports, which could adversely impact Sri Lanka’s BOP position.

According to the latest Central Bank data, the vehicle imports to the country in the first five months of the year have grown by a whopping 110.6 percent year-on-year to US $ 665.9 million.

Speaking to Mirror Business earlier, Ceylon Motor Trader Association’s (CMTA) immediate past Chairman Reeza Rauf blamed the grey market for the hike in vehicle imports under the unit rate-based duty scheme.

According to him, about 60-70 percent of vehicles have come into the market through grey importers with a sharp increase in the below 1000 cc category.
“On average 85-90 percent of passenger car registrations in the last four months have been vehicles below 1000 cc engines, which is shared among a few stakeholders. This also has paved the way to an influx of below 1000 cc and high-end expensive vehicles by grey importers,” he said. 

However, expressing his opinion on the matter, Peiris said that there is a demand for vehicles outside of Colombo and pointed out that the vehicle ownership is still mostly concentrated in Colombo. 

Rodrigo claimed that parallel importers are bringing down high quality domestic models compared to lower quality export models brought down by agents.
“What we get are domestic models which are of quality with better safety and emission standards, and option wise they are much  better vehicles,” he reiterated.   
Rodrigo also urged the authorities to introduce a duty structure based on depreciation for imports of used vehicles.

Pix by Kushan Pathiraja