Motor vehicle registrations high despite curbs on imports
Current vehicle registrations stand at 4,990 in 2015 while there has been an upward trend in vehicle leasing and financing market since 2009.
These views were expressed by Firaz Marker, Managing Director, Carmudi Sri Lanka – online vehicle retailer – Carmudi.lk – at a media briefing to launch a report on ‘Sri Lanka’s vehicle leasing industry, held last week in Colombo. With their website, Carmudi.lk, he said that they are the Sri Lanka’s pioneering online vehicle retailer.
He said that the value of automobiles in Sri Lanka has remained constant making it a safe investment, pointing out that car financing is one of the few collateral-based lending channels remaining for the industry. He said that banks have lowered interest rates as low as 9 to 10 per cent in order to meet consumer demand. A majority of new and used vehicle registrations see financing in Sri Lanka and in August 2015, 68.4 per cent of new car registrations resulted from financing. During the same period, he said that 64 per cent of used cars, 57.4 per cent of two wheelers and 91.6 per cent of three wheeler vehicles were financed.
He said that this growth is registered despite the new government’s attempts to reverse its relaxed import duties and interest rates. The government, he said, is exploring two policies which are outlined in a JB Securities report. He said the policies explored are increase excise duties on cars and decrease debt-to-equity ratio for car financing. The first policy envisaged, he said would increase the already high by ASEAN standards duties and the second would require a smaller debt-to-equity ratio, which means that borrowers would need to provide a larger percentage of the car’s purchase price.
Commenting on the impact of the elections on the economy, basing his comments on the same source, Mr. Marker said that among the challenges for the government is the high fiscal deficit and the economy faces a daunting challenge of trade deficit reaching US$9 billion this year.Sri Lanka continues to pursue currency devaluation and improved trade relations with the neighbouring countries, based on various sources, he pointed out. He said that prior to the parliamentary election, the Central Bank propped up the rupee to avoid voter discontent and he said that it brought back rupees in exchange for its foreign reserves in US dollars to prevent the depreciation of the rupee.
He said that the motor industry reached its peak as the economy improved after the war in 2011, but in 2012 the number of car registrations dropped as the rupee was allowed to float in the currency markets and imports were curbed. He said that yet 2015 is a turning point in the new car sales for Sri Lanka hitting the vehicle registration at 4,990 where small cars made up 94 per cent of all new car registrations. Maruti remained the small car market leader with 81.7 per cent according to JB Securities, he said.