Mobility in Sri Lanka: Beyond the import ban
File picture of cars at the Hambantota port.
Prior to the import ban, Sri Lanka was importing around US$ 1.5 billion worth of motor vehicles annually. The expenditure on petroleum imports (for motor vehicles) was $2.9 billion in 2018. Our travel speed within the city of Colombo was estimated by the University of Moratuwa as 8 kmh. Our air quality was classified as ‘hazardous’.
Everyone living in Colombo will recall how much cleaner and greener Colombo was during the lockdown. Even now, the impact of the pandemic, the closure of schools and less people travelling to work has resulted in much lower levels of congestion. Pre-pandemic it was estimated that 1 million people travelled daily into the city of Colombo.
Import ban
There has been a lot of negative publicity against the vehicle import ban. Sri Lanka’s trading partners are objecting against it. Vehicle importers are crying for the recommencement of imports. They argue that the vehicle import ban is creating a devastating impact on the automotive industry and not having a significant impact on the fast depreciating Sri Lankan exchange rate.
Segments of the industry are arguing for the commencement of locally assembled motor vehicles. On this topic, I am presenting three areas for the readers’ consideration:
1. Internal Combustion Engine (ICE) vehicles are “old technology”. Many leading nations in the world have announced that they will be banning ICE from 2025. In this context, should Sri Lanka be encouraging the assembly of ICE vehicles, or should we be considering the assembly of Electric Vehicles (EV’s)?
2. If we are considering the assembly of ICE vehicles, do we have a large enough domestic market for this exercise to be efficient and viable? Consider that Malaysia with a population of 29 million and a per capita GDP of $29,000 struggles to produce and sell 100,000 cars per year. Malaysian manufacturer, Proton, has been making losses for the past decade. Sri Lanka has a population of 22 million and a per capita income of under $4,000.
3. What is the nature of the local value addition that can be added? Apart from tyres, and batteries, are there any significant components that could be manufactured locally?
The assembly of EV’s can be viable at smaller annual production volumes, as an EV has less than 20 moving parts. Over 60 per cent of the cost of an EV is its battery. The Lithium Ion battery of an EV can be assembled locally. Inputs such as graphene are locally available. We also have abundant solar resources to charge these batteries. Hence, the assembly of Battery Energy Storage Systems (BESS) is an area that Sri Lanka could explore, and this would then make EV assembly in Sri Lanka viable.
Shared mobility in Sri Lanka
A case study by the Harvard Business School entitled ‘The Future of Mobility – Economic, Environmental and Social Implications’ by George Serafeim and David Freiberg (Case Study 9-118-008) states that a shared mobility vehicle replaces between 9 – 32 privately-owned vehicles. Shared mobility had already taken off in Colombo, prior to the pandemic. We experienced the efficiency of shared mobility, with the reduction in travel prices through ride hailing apps and ride sharing platforms. Over time, assuming the progressive decline of the pandemic, shared mobility is expected to grow rapidly. The rate of growth can be increased by discouraging commuters driving into the city through the provision of parking at the city entry points and the levying of a city entry tariff. Limiting parking within the city is another lever that can be used to move mobility from privately-owned to shared.
Lifting the ban
Sri Lanka is facing global pressure to lift the vehicle import ban. The three strategies below could help the Government lift the import ban, and still influence the expenditure of vehicle imports, target pollution, congestion and the high expenditure on fuel (for transport).
The first strategy is the implementation of the Singapore Certificate of Entitlement (COE) model in Sri Lanka. “The Certificate of Entitlement” or COE is the quota licence received from a successful winning bid in an open bid uniform price auction which grants the legal right of the holder to register, own and use a vehicle in Singapore for a period of 10 years. When demand is high, the cost of a COE can exceed the value of the car itself.
The tried, tested and proven COE model will give the Government the ability to influence the total number of vehicle imports in each vehicle category. This will allow the Government to limit the expenditure of foreign exchange on vehicle imports. Market demand will determine the monetary value of the COE. The system of COE can be a strong yet transparent revenue earner for the Government.
The second strategy would be for the Government to only permit the import of EV’s as vehicles for personal mobility, under HS Code 8703. Given the size of Sri Lanka, an EV has adequate range to cover the distances required by most commuters. Given the abundance of solar resource, charging can be powered by the sun. A charging network will be inexpensive to compile. Thus, converting our vehicle park to EV’s will bring a reduction in our fuel import bill over time. This strategy can be phased in, by initially allowing ICE’s at a high duty point so the duty is both a deterrent and also a source of income for the Government. The phased strategy will also give time for the charging infrastructure to evolve.
For larger commercial vehicles such as lorries and buses (imported under HS Codes 8702 and 8704) the compliance to EU6 emission standard should be made mandatory. This will have a significant impact on reducing the level of environmental pollution through exhaust gas pollution.
The third strategy has already been mentioned and that is the assembly of EV’s and BESS’s in Sri Lanka.
Conclusion
The mobility eco system is facing disruption. The vehicle import ban has given the Sri Lankan Government an opportunity to pause, and evaluate a future strategy that can be of long term economic benefit to the country. A strategy that promotes shared mobility, the use of EV’s and EU6 compliant vehicles will significantly reduce pollution, congestion and the import cost of fuel in Sri Lanka. These strategies will also position Sri Lanka so that they can adopt Autonomous, Connected, Electric and Shared (ACES) mobility solutions in a timely manner. This will leap-frog Sri Lankan mobility from outdated to current or even futuristic.
Many automotive manufacturers are converting their fleets to Electric. Jaguar Land Rover has just announced that Jaguar will be all electric by 2025. The players in the automotive industry need not lament at their economic fate, due to the ban on motor vehicle imports. Instead, they could actively explore the blue ocean of ACES, and make Sri Lanka a global leader in this sphere.
(The writer a Co-Founder of Innosolve Lanka (Pvt.) Ltd, a start-up dedicated to introducing sustainable mobility solutions in Sri Lanka).