Vehicle and vehicle spare part imports fell 21 percent in 2012, after seeing a robust growth of 200 percent and 86 percent in 2010 and 2011, respectively, a study carried out by the Ceylon Chamber of Commerce (CCC) noted.
As the study pointed out, a number of factors including duty increases, credit ceiling imposed on banks on loans extended to private sector and hike in fuel prices mainly contributed towards this decline.
The government increased the excise taxes on vehicles in March 2012 to discourage imports to bridge a widening trade deficit, while imposing an 18 percent credit ceiling on commercial banks amidst a depreciating rupee.
However, the report pointed out that the year 2012 commenced with buoyant demand for vehicles.
“The vehicle registration data indicate that during the first quarter, the number of vehicles registered in fact is higher than the number registered the previous year. The impact of the negative developments had started making dents into the market from the second quarter onwards,” the study noted.
As the study illustrated, several vehicle categories recorded a steep decline of above 50 percent in terms of quantity imported in 2012.
These are small passenger vehicles of less than 1000 cc (and passenger vehicles between 10001500 cc, both of which declined by 72 percent each. Passenger vehicles exceeding 1500 cc but below 3000 cc declined by 65 percent, while passenger vehicles exceeding 3000 cc declined by 77 percent.
Import of hybrid electric vehicles declined by 67 percent and diesel auto-trishaws by 55 percent.
According to the CCC study, India continued to dominate the market for imported vehicles in 2012, accounting for 50 percent of the total vehicle imports to the country. The market share of Japan declined to 22 percent from 36 percent in 2011, showing a steady decline market share. However, the study noted that this could be partly due to a shift in production facilities by the Japanese companies to other Asian countries such as India and Thailand and also to the high taxes imposed on Japanese vehicles by the government, making them less affordable. China is the third leading supplier of vehicles to Sri Lanka and its share has increased from 5 percent in 2011 to 7 percent in 2012.