Vehicle prices will rise initially, then gradually decrease: President

• The government plans to import USD 1.2 billion worth of vehicles starting February 1
• Between USD 1 and 2 billion worth of vehicles were imported annually in 2018 and 2019

By Chaturanga Pradeep Samarawickrama   

President Anura Kumara Dissanayake said yesterday that though there will be a price increase on resumption of vehicle imports in February, after a five-year pause, the prices will gradually decrease depending on market behaviour.   

Participating in a televised interview last night, he said that vehicle prices will initially rise due to the initial high demand during the first few months. But over time, the government plans to ease this pressure gradually.   

“Between USD 1 and 2 billion worth of vehicles were imported annually in 2018 and 2019.  The decision to resume vehicle imports was not made to strengthen the dollar reserves but as a step to reopen the vehicle market and drive the country’s economy forward. However, this resumption must not adversely impact the current dollar reserves,” the President said.   

“The existing vehicle market is largely composed of vehicles imported when the dollar rate was Rs.190. Now, with the dollar rate at Rs.300, new vehicle prices will see a 40% increase in line with the higher exchange rate.   

“However, a second-hand vehicle market has emerged due to the suspension of imports, with many vehicles purchased under leasing facilities at higher rates. Measures must be taken to avoid conflicts between second-hand and brand-new vehicle market prices,” the President said.   

“A conflict will arise if the prices of second-hand and brand-new vehicles align. Therefore, Brand-New vehicle prices should remain slightly higher than second-hand vehicle prices to prevent a crisis for leasing companies and banks,” he said.   

“The government plans to import USD 1.2 billion worth of vehicles starting February 1, with imports continuing throughout the year. However, the government does not intend to open the market to all vehicle imports at once during February.   

“Around 20,000 vehicle permits have been issued so far, but those permit holders will not be accommodated at this time. The government is currently discussing alternative arrangements for these permit holders. In 2018, USD 1.9 billion was allocated for vehicle permits,” he added.