New vehicle registrations slump by 6 % in January
View(s):Sri Lanka’s vehicle registrations fell by 6.1 per cent to 42,443 in January this year from 45,218 in December 2016 amid the lowering of finance facility and significantly higher increase in import tariffs.
The implementation of the 2017 budget proposal to restrict credit to 50 per cent of the total value for car purchases has triggered a slump of 11 per cent in car registrations to 3,101 in January, from 3,487 in December,
There was notable drop in Suziki Alto and Renault Kwid, and a surge in Hyundai Eon cars (100 per cent increase), JB Securities said in a research note.
There was big jump in used cars, especially Toyota’s Electric cars are picking up and SUV slightly up, driven by Vezel and Prado’s, the Colombo-based research and stock broking house highlighted in its research report
Used hybrid cars have also gone up with AXIO witnessing a significant hike (200+) and there was a 268 per cent increase in mini vans with Suzuki EVERY becoming the biggest mover, the report revealed.
Three wheeler’s came down by nearly 50 per cent with Bajaj losing market share to TVS while Mini Trucks have come down by 20 per cent MoM and heavy trucks have gone up slightly. Buses have gone up by 40 per cent.
Implementation of the budget proposal to restrict credit to new cars (50 per cent new loan-to-value – LTV) ratios and three wheelers (25 per cent LTV) was the primary factor accounting for a plunge in registrations. The full impact of the directive will only be felt in February, JB Securities said.
Three wheelers may be a menace on the road but it is a huge contributor in creating inclusive growth both in terms of being a production asset (taxi) and/or personal vehicle providing mobility to the owner which in turn increases his radius of employment opportunities, ability to work flexible work hours due to not being reliant on public transport, access to markets, etc, it added.
Secondly, for every taxi there is a consumer who seeks its service. By reducing the supply of such services the consumer surplus will reduce and prices will go up or there will be unmet demand. Since mobility is a derived demand (it’s a means to an end), the lack of it will retard final demand which retards economic growth, JB Securities pointed out.
JB Securities said using micro prudential regulation like a LTV rule to control traffic in the city is the wrong policy instrument.
Traffic is location specific (hot spots like junctions) and time specific thus policy measures should try to shift vehicle usage from specific locations and peak times – the best mechanism is dynamic congestion pricing (aka surge pricing like in Uber) that will provide incentives for users to postpone their trip, car pool, use public transport or use a different route.
The report said the LTV rule is not geographically specific thus its impact is far more regressive on a rural lower income individual for whom the marginal returns to labour are higher – due to lower urbanisation access to markets and jobs require longer travel which cannot be achieved due to lower availability of public transport.
Further, roads in rural areas have fewer vehicles on them so traffic is a lesser concern.
Justifying lower LTVs on three wheelers on the grounds of creating a larger pool of labour for industries such as construction is without merit, JB Securities said adding that male and female labour participation is 70 per cent and 35 per cent, respectively.
Even amongst those who are active in the labour force there is significant underemployment – the potential labour supply is larger than currently in the workforce, the research report revealed.
A possible unintended outcome of this directive is that one year-old vehicles may increase in price for there are no LTV restrictions on them, the report said.