Motor vehicles roll in after near-4 year ban
View(s):Motor vehicles, since the lifting of a near 4-year ban last month, have begun rolling in with two shipments so far from Japan but analysts said while there is initial demand this is likely to taper by the end of the year.
Bankers said so far up to US$100 million in letters of credit (LCs) have been opened for an initial booking of around 3,000 cars and other motor vehicles but the amount set aside for imports hasn’t put pressure on the US dollar.
Motor vehicle importers expect the demand to rise to around an annual import cost of $200-$300 million this year which would be lower than the $800 million cost of vehicle imports in the pre-ban period. Earlier Central Bank authorities said around $1 billion had been allocated for vehicle imports this year
“There is no pressure on the dollar which has been hovering below Rs.300 per dollar this week,” one money market dealer said adding that given a possible drop in imports by year’s end compared to the pre-ban period, projected tax revenue from this source might fall.
Despite the hype over vehicle imports and a possible ‘surge’ in pent-up demand, importers observed that while inflation is down, income levels have not increased and thus there is pressure on the cost of living. Lower income levels will also impact on the ability to purchase a vehicle and with higher vehicle prices now than at pre-ban levels, vehicles are beyond the reach of middle-class buyers, they said.
On the positive side, the tax collection in the past 12 months has been beyond targets and expectations, and once-negative balances of the government in state bank accounts have turned positive. With tourism earnings up, other exports rising and migrant remittances rolling it, economists said the possible drop in tax revenue from vehicle imports is unlikely to dent the tax position. On the other hand, it is likely that the authorities might consider reducing taxes to encourage more purchases.
In the meantime, the Hambantota Port received its first post-ban vehicle shipment on Thursday. The MV Jupiter Leader, operated by NYK Lanka (Pvt) Ltd, arrived at the port, discharging a total of 378 vehicles from Japan, of which 196 were for the local market. The Japanese vehicles that arrived for the local market included Land Cruisers, Hilux cabs, Prado SUVs, Toyota sedans and Suzuki Alto mini cars.
Finance Ministry officials have said that the bulk of revenue gains in 2025 would come from motor vehicle import taxes, noting that the excise tax structure for standard passenger vehicles remains largely unchanged.
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