India and China auto makers vie to enter vehicle assembly business in Sri Lanka
View(s):By Bandula Sirimanna
India and China auto makers are vying to enter the vehicle assembly business in Sri Lanka with local partners – a move that is viewed with a lot of concern by local motor traders saying the Chinese and Indian investors will bring down vehicles in completely knocked down form to avoid heavy levies.
Local motor traders said foreign parties want to take advantage of the Sri Lankan government’s recent action to promote local car manufacturing against tighter import controls and higher customs duty on finished products.
The minimum assessable value for import duty on imported cars has been increased to Rs. 750,000 throwing the cost competitiveness of small car importers out of gear, they added.
The duty hike proposed in the 2013 budget will affect profits and sales of Sri Lankan vehicle importers and will adversely affect demand as this will put additional pressure on buyers, they revealed.
Maruti Suzuki India Ltd has announced that they are planning to set up a car assembly plant with an investment of around Rs.600 million in Sri Lanka in collaboration with Associated Motorways PLC (AMW) to consolidate its considerable market share in the island.
This was confirmed by a top official of the AMW saying that the whole project is in the planning stage.
In April, Sri Lanka increased car import duties to 200 per cent from 120 per cent.
In November, it increased the ‘minimum assessable value’ for cars to Rs. 750,000 from Rs. 450,000.
Under this set up even if the Maruti Alto’s landed cost is Rs. 500,000, the 200 per cent duty will be imposed on it.
This move has greatly affected Maruti’s cost-competitiveness in the local market and Maruti car exports to Sri Lanka are declining rapidly, AMW official said adding that their sales have dropped by over 50 per cent.
Sri Lanka was among the top five importers of Maruti cars and in 2011-12 some 15,000 Marutis were sold in the country accounting for over half of the country’s new car market, he disclosed.
Geely, the Fortune 500 Chinese automotive multinational that now owns 100 per cent of Sweden’s Volvo and part produces London’s black taxi cabs, is entering Sri Lanka with a plan to set up a vehicle assembly plant in Hambantota, a senior official of the Ministry of Industry and Commerce said.
The Chinese company will launch a joint venture initiative with Sri Lanka’s Micro Cars Ltd soon with the aim of promoting Sri Lanka as its production hub and to export vehicles to South Asia and the Far East from here with a shared investment of US $20 million, he added.
Local motor traders were of the view that that Sri Lanka’s high tariff hike on imported vehicles could have been influenced by China to enter the country’s automobile segment.
At present most of the car, two-wheeler and commercial vehicle sector is dominated by Indian companies such as Tata Motors, Ashok Leyland, Bajaj and Maruti Suzuki, motor traders said.
Move worries local motor trade
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