Expectations of level playing field for motor traders
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The Sri Lankan automotive market is quite volatile but motor dealers believe that customers are used to this dynamism in the industry, which is a normal phenomenon.
Motor traders are very positive and look forward to a marketplace that will prove to be promising, now that key economic activities have stabilised and investments have become more distinctive.
The positive forecast is likely to continue in the face of higher import duties. Year 2018 will bring high expectations for imports of one-litre micro-market segment vehicles.
Vehicles with a capacity of 1.6 litres or less have seen a sharp rise in demand while higher engine capacity vehicles remained out of reach and a distant dream for car buyers.
The Sri Lankan Government proposed a duty increase in the 2017 budget that resulted in a downturn of imports with the aim of controlling traffic congestion on the roads.
This abrupt duty change together with the government’s plan to reduce the number of vehicle imports reduced vehicle registrations last year.
Finance Minister Managala Samaraweera has responded in a very positive manner to find solutions to the grievances faced by motor industry in Sri Lanka, during pre budget discussions with Ceylon Motor Traders Association (CMTA).
The CMTA has had a series of meeting with the policy makers of the Ministry of Finance under the directions of the Finance Minister and on the budget proposals submitted by the association.
The CMTA is very confident unlike in the past their recommendation would be viewed in a very positive manner in the best interest of the motor trade in Sri Lanka whilst ensuring no drop tax revenue to the Government.
Minister Samaraweera at the discussions with CMTA had pledged that he will ensure that a level playing field would be created for all stakeholders in the motor trade.
The minister gave a fair hearing to their problems in the motor trade understanding the current situation very well and accepted that there have been a lot of anomalies in the past that has adversely affected the motor dealers in Sri Lanka.
CMTA, the apex automobile franchise body of global automobile brands imported to Sri Lanka, had continuously lobbied for policy consistency from the government in the automobile industry.
The CMTA would continue to lobby against the government’s ad-hoc policy changes, which had badly affected the country’s legitimate vehicle business in the past couple of years.
The government should introduce a change to its policies on the automobile industry which has created a ‘no level playing field’ in the market while certain sectors especially the used car imports continuing to benefit.
It has also been very unfortunate that the relevant government institutions had in the past failed to recognise CMTA’s contribution to the economy
The government had contradicted its own budget proposal of 2016 presented by the former Finance Minister, where it suggested re-exporting vehicles, which are five years and older, as these so-called used spare parts could be well over five to 10 years.
There is a danger in permitting such a move as the unsuspecting buyer would not know the year of manufacture of these assembled vehicles as a car manufactured years ago can be issued with a latest registration number plate by the Registrar of Motor Vehicles.
The present valuation system in place for import brand new vehicles was disadvantageous to the country and it has cost the government coffers a colossal loss in terms of revenue. The authorities could find out for themselves the extent of loss by carrying out an appropriate investigation and evaluate the market trend for the last one to one-and-a-half-year period.
The grievances of the legitimate importers of brand-new vehicles had fallen on deaf ears in the past but the discussions with Minister Samaraweera will hopefully turn around the situation.
The industry had also been badly affected by the Central Bank’s restrictions on loan-to-value ratios (LTVs) to 50 per cent for motor cars and SUVs, 70 per cent for motorcycles and 25 per cent for three-wheelers.
This has hampered the customer demand to purchase at least a low-end motor vehicle through a financing facility.
The CMTA was very much aware of the dilemma the government had to face in bridging the balance of payments gap of the country.
Both the motor traders and government should work together without further delay to create a level playing field and find a mechanism for the sustenance of the industry, its stakeholders and future growth.
The policy makers should not resort to shortsighted sudden changes, rather look at more wide and open minded policies that are beneficial to the consumers and as well as the industry.
It’s high time that policy makers look at matters from a common man’s point of view of what he can afford and at the same time see how to protect the automobile and transport industry in continuing their day to day business activities in a healthy manner, where this could play the major role in the development of the country.
(The writer is the chairman of CMTA)