Last Updated : 22-08-2014 17:05


Vehicle registration plunges in June

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hree-wheeler registrations dropped sharply from 13,753 registrations recorded last year to 4,340, while motor cycles decreased by 46.3% to 12,181.

The decreasing trend in registrations was also felt across all other categories of vehicles, including the motor car segment, which recorded a 56.4% YOY decrease to reach 2,208, alongside a 26.5% and 12.9% decrease in registrations of dual purpose vehicles and goods transport vehicles, respectively.

The ongoing decline in registrations was a largely anticipated trend caused by last year’s second quarter increase in vehicle taxes by 20%, in addition to the implementation of an 18% credit ceiling by the Central Bank as part of a policy package in February, designed to reign in credit growth and ease pressure on the balance of payments.

February’s policy changes also saw the Central Bank abandoning its policy of pegging the rupee to the US dollar, as part of its attempt to stabilize the vast gap in the balance of payments.

Whilst the wider ramifications of plunging vehicle imports on Sri Lanka’s economy, particularly its impact on government revenue, have yet to be analyzed, the impact of policy changes for Sri Lanka’s lower to middle income population is thought to be significant.

“Prior to the slashing of import duties for vehicles and the boom in credit growth, there was a huge shortage of vehicles. When the government increased the import duty for vehicles and lowered interest rates that pent-up demand exploded,” J. B. Securities (Pvt.) Ltd.Director and Chief Executive Officer Murtaza Jafferjee said.

“Initially, we saw the most growth in the luxury car market segment.However, that market was quickly saturated. Since then, it was the demand for small cars, three-wheelers and motor bikes in particular that drove growth in vehicle imports,” he noted.

Jafferjee further noted that tightening credit would likely impact lower-end consumers since the majority of such purchases were carried out through leasing agreements, likely resulting in vehicles that cater to the low-income market becoming prohibitively expensive.

He added that the issue would be further complicated by the issue of duty-free permits by the government to public servants, which acted as a distorting force on the vehicle market.

Elected Members of Parliament and Provincial Councils are amongst those eligible for duty-free permits, which are issued once every five years, which translates into approximately 608 duty-free permits that have been issued, each granting the permit holder a duty waiver of up to US$ 50,000.

“All of these permits will almost certainly be used if they haven’t been already and this distorts market forces and results in the creation of a secondary market,” Jafferjee said.

The issue of duty free permits is one that caused controversy more recently when media reports surfaced that permit holders purchased vehicles at lower prices only to re-sell them at a profit, in the backdrop of a round of belttightening by the general populace as the economy experienced its first contractions since post-war growth first kicked off.


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