Vehicle import ban drives motor traders off the road
With the government’s extension of vehicle import ban till December 31 this year, around 32,000 people directly and indirectly employed in the motor trading sector would lose their earnings and even jobs as motor vehicle dealer companies’ move towards closure within months, motor traders warned.
Vehicle sales revenue of motor traders was zero during the countrywide curfew period during COVID-19 between mid-March to May 2020 and there was a significant drop in sales of all vehicle dealers up to now.
As the COVID-19 pandemic situation is still uncertain, it is difficult to predict the future business impact on auto trading companies, they added.
To remedy the ailing industry, the Ceylon Motor Traders Association (CMTA) has urged the government to impose CIF restriction for all imports (maximum of US$30,000) and allow imports based on LC method where the bills will be paid after one year or six months.
It has also suggested the government to introduce a quota system for vehicle imports based on the number of company employees.
President’s Secretary Dr. P.B. Jayasundera recently stated to the media that “the vehicle stock in the country had risen significantly between 2015 and 2019; to the extent that it would be sufficient for 2 1/2 years”.
In a letter to Prime Minister and Finance Minister Mahinda Rajapaksa, CMTA chairman Yasendra Amerasinghe noted that while high levels of vehicle stocks may be available for 2 1/2 years with private or parallel importers, franchise holders, who import directly from their respective manufacturers, possessed stocks sufficient for less than two months of sales.
Franchise holders import vehicles according to customer orders/demand which are designed and recommended for Sri Lanka by manufacturers, he informed the Premier.
He added that with vehicle sales revenues quickly dropping, motor traders are facing great difficulties in sustaining their employee base at a cost of Rs. 538 million per month.
Members of CMTA contribute Rs. 69.30 billion to government coffers as customs duties/taxes, port charges, registration fees, income taxes, stamp duty, and municipal council rates etc, official data showed.
The total contribution of motor vehicle franchise dealers to supporting industries such as banking/finance industry (charges, interest, etc) insurance, leasing and lubricant industries as well as lubricant industry etc is in the region of Rs.139.40 billion.
Franchise holders spend Rs.8.09 billion to maintain their employee base and they are trying their best to minimise salary reductions and/or job cuts so far, Mr. Amerasinghe said.
The latest Central Bank data showed that for the first six months of 2020, Sri Lanka spent US$273 million to import vehicles.
The government has lost over Rs. 68 billion in revenue due to the suspension of vehicle imports of franchise dealers which is only about 30 per cent of total vehicle imports.