The Colombo Motor Traders Association (CMTA) last week said that continuous ad-hoc policy making has been extremely advantageous for used car importers, while endangering the survival of professional licensed car dealers.
The car import duty structure was changed recently to a unit price based on engine capacity, instead of the level of luxury, brand or options. “The preference given in the present duty structure for vehicles under 1,500cc is a concern to us. This is a segment that is predominantly filled by second hand dealers, and we have a serious disadvantage because brand new cars imported don’t fall under this category,” CMTA Outgoing Chairman Gihan Pilapitiya said. He said that if the duty of a 1,500cc model goes up by Rs. 300,000, the duty for a 1,600cc identical model increases by Rs.2.5 million, which is a significant imbalance.
The incoming CMTA Chairman Reeza Rauff noted that licensed car dealers can only import the 1,600cc models, because Japanese manufacturers have conducted lengthy research and development to create the ideal models for tropical countries such as Sri Lanka. “A layman may see a car off the road and buy. Tropicalization, suspension and ground clearance may not be significant for them, but from the manufacturer’s point of view, yes it is, in terms of warranty claims, repairs and after-sales,” he said.
Pilapitiya added that second hand dealers are also using the newly granted depreciation discount, combined with the unit price to import domestic models with full options, as the Cost, Insurance, Freight (CIF) values are not calculated into duty anymore. “They have been given a discount of 17.5 percent for depreciation which also doesn’t make any sense. So their duty slap is less, and they also get a discount on valuation. But if they’re importing zero mileage cars, there’s no need for giving any depreciation or any discount against that,” he said. However, when the new taxes were introduced, the used car impor ters created a big fuss. Rauff noted that it is not healthy for the country to be importing used cars. “Anyone can be an importer.
They buy an empty plot of land and import 3-4 cars. But the credibility of that is questionable. You don’t know from where the vehicles are coming, what the condition of the vehicle is and how it was imported,” he said. Rauff also charged that it was the under invoicing practiced by some of the used car importers that led to the government to take control of valuations. “But since they couldn’t handle it, they put these policies across the board, affecting everybody.
This is what’s happening. But the government must understand that importing brand new vehicles is a different industry altogether,” he said. Pilapitiya added that it has not been clear how the government is basing its new valuations, but it would be ideal to calculate from information on the manufacturers’ websites. Meanwhile, he said that even though the government has a tough job in balancing the country’s balance of payments, a level playing field should remain to ensure the survival of all. “The next two years are going to be very tough. We have appealed to the government to give us some relief. We’re very professionally organized. We have 2000- 3000 employed in each of these companies. We have infrastructure, overheads, branches etc. we need to survive,” he said. Rauff added that car dealers employ and train students at vocational institutes as well. “Once they put on their CV that they have worked for Mitsubishi, Audi and Volkswagen, they’re in the Middle East, earning 10 times more. The government should see how much we’re contributing to the country indirectly with foreign remittances,” he said. However, he noted that the government only sees the import figure of cars and attempts to adjust the numbers, which could lead to companies shutting down and laying off thousands of Sri Lankans.