The Vehicle Importers Association of Sri Lanka has submitted a proposal requesting the government to extend the stipulated age limit of used vehicle imports from two years to three and a half years.
“The majority of customers in Sri Lanka are within the Rs 2 million price bracket, and so they are deprived of choice due to the non availability of affordable and suitable vehicles as a result of the age limit of two years, and this is probably the reason why cars older than 30 years are still plying our roads,” a statement from the association read.
“The government can assist such users to upgrade their standard of life by making high quality reconditioned vehicles available in the country. Such a decision would see an end to the inflow of cars of a substandard quality coming into Sri Lanka,” the association stated.
The statement noted that countries like Japan, where a majority of vehicle imports to Sri Lanka are currently sourced from, tend to see the prices of motor cars depreciate substantially at the end of three years due to the fact that users are required to renew their licenses for these vehicles at that point, and often find it cheaper to purchase a new vehicle instead.
The association cited the price trends of vehicles in overseas markets which have been shown to drop by a minimum of Rs 900,000 for small cars within two years of age when compared with cars at three and a half years, leading not only to cheaper vehicles but also simultaneously lowering the outflow of foreign exchange from the country.
“Even though these vehicles are used or reconditioned, Sri Lankan vehicle users prefer to own vehicles of Japanese origin as they consider them a safer investment when compared to purchasing a new vehicle which is of substandard quality.”
“Substantial quantities of brand new vehicles which are of poor or substandard quality are being imported into Sri Lanka presently. Most of them are manufactured using outdated technology and Sri Lanka may be the only overseas market for some of these vehicles, thus it has become a dumping ground for such vehicles,” the statement read.
The association alleged that the import of such poor quality vehicles is a contributory factor to the alarming increase in road accidents in the country.
“Sri Lanka is considered as a third world Asian market by most of these manufacturers and so they assume that customers in are more price conscious that quality conscious. Most of the vehicles manufactured for such markets neither conform to safety standards, nor to exhaust emission standards,” the association asserted.
Addressing issues of policy inconsistency, the association stated that the government had created an uneven playing field for vehicle importers by raising customs duties in order to slow down vehicle imports, ease pressure on exchange reserves and build state revenue. However, by subsequently offering concessionary terms to certain vehicle importers, the government effectively negated its “hap-hazard increase of customs levies”
“All our members are local investors who are self employed however our business has been crippled as a result of policy inconsistency, frequent and hap-hazard changes to the tariff structure and the granting of concessions on taxes to an industries which, under the pretext of manufacture of vehicles locally, imports all parts and merely assembles them for sale in the domestic market.
“Curtailing imports either by reducing the stipulated age limits of used motor vehicles or by increasing customs levies cannot be considered the most desirable form of achieving the government’s targets. Instead, higher exhaust emission and passenger safety standards ought to be implemented in order to restrict the inflow of vehicles of low quality into the market,” the association stated.
The statement also noted that in most developed markets, age limits on vehicle imports tend to be as high as 10 years.
“We are not requesting any concessions or a reduction in taxes or levies currently being charged. Our primary concern is to clear all anomalies and confusion in the present system thereby creating a level playing field in our trade whilst assisting the government with effective collection of revenues due to it.”
Vehicle imports grew significantly over the course of last year, eventually resulting in the government increasing customs duties of vehicles by 20% whilst curbing credit availability through the implementation on an 18% credit ceiling and the depreciation of the rupee following a new set of flexible policy measures.
Subsequently, vehicle imports showed a marked reduction, most recently recording a 46% drop in registrations during the month of August.
In total, 283,322 vehicles were registered in Sri Lanka between January and August of this year of which, 23,602 were reconditioned vehicles and 259,720 were brand new.