Japanese used car market in Sri Lanka gets beating from heavy taxes
View(s):Sri Lanka’s used and re-conditioned car sales recorded a new high of around 56,000 units last year doubling the number of cars sold in 2014 although it has come down to a great extent during the months of November and December due to the tax hike, Motor Traffic Department data showed. Almost all of those were made in Japan as Japanese cars are particularly in demand because of widespread confidence in their quality and reliability. According to statistics released by the Ministry of Finance, Sri Lanka is the number one destination by value for used passenger cars exported from Japan in 2015, up from third place in 2014.
The export value of those cars to Sri Lanka has increased by 54 per cent to US $755 million last year comparing to previous year, the data showed.
In terms of volume, Sri Lanka was the sixth-largest global export market for used Japanese cars last year, buying 51,561 units. As a result, hybrids like the Toyota Prius and Aqua, the Honda Fit and Vezel and Suzuki’s Wagon-R have flooded the Sri Lankan market last year. But this situation has been changed during the latter part of last year following the raising of taxes and vehicle valuation system from the 2016 budget.
Indika Sampath Merenchige, Managing Director at Wasana Trading Lanka and Head of the Vehicle Importers’ Association of Lanka, said the government should support private vehicle importers. Japan’s used passenger car exports to Sri Lanka have dropped to around 3,000 units in November and December last year. The drop in demand of used cars in Sri Lanka is seen as badly affecting Japan’s used-car industry, and the outlook for the sector is becoming bleak, Mr. Merenchige said. Sri Lanka has earned Rs. 232 billion from vehicle taxes in 2015, and a similar amount is expected in 2016 despite an expected fall in imports. Upto November Sri Lanka has spent a sum of $1,294 million (around Rs.180 billion at an exchange rate of 140 to the US dollar) on vehicle imports, up from $785 million in 2014.