Drop in sales hits car market

By Lalin FERNANDOPULLE

[email protected]

The car market in Sri Lanka has been adversely affected due to the sharp drop in sales following the global economic turmoil and the increase in import levies. Surviving in the motor trade is the biggest challenge for those in the industry.

Deputy Managing Director, Motor Division, Associated Motorways Ltd. (AMW), Ranjan De Silva said car sales declined by over 50 per cent due to high interest rates, inflation and oil prices. The financial crisis in the world aggravated the situation and today the company is facing the worst times.

“AMW registered 27,000 cars in 2006 which was a peak year in performance. Despite the concessionary duty imports sales dropped to around 22,000 units last year which is a 18 per cent decline.

Net stock sales this year will reduce to around 11,000 units”, he said. The 200 per cent margin on passenger cars has caused restrictions on the import of vehicles. Motor traders are not importing vehicles due to the low demand.

The Ports and Airport Levy (PAL) was increased from 3 to 5 per cent, VAT to 20 per cent and the input tax reduced from 15 per cent to 10 per cent.

De Silva said the Nation Building Levy of 1 per cent on the turnover is an added burden on the industry.

The purpose of introducing taxes is to restrict imports and develop the domestic industries. There is no properly developed local manufacturing industry in the country.

Sri Lanka is known for having the highest number of taxes. The motor trade is a highly capital intensive industry with a large workforce. Low sales will restrict recruitment and initiatives.

The car industry does not benefit from the Indo-Lanka Free Trade Agreement since motor vehicles are in the negative list of the agreement. Importers of spare parts benefit since such items are not in the negative list.

Chairman, Ceylon Motor Traders’ Association, Senaka Amarasinghe said due to the high margin on import of cars motor traders will not be able to survive. The future will be bleak for the industry. “Stakeholders have called upon the government to retain the 100 per cent import margin and grant relief to importers”, he said.

An official of Carmart said the company has not felt the impact of the import regulations since it has the imported stock. The company will face the consequences shortly with the increase in import costs.

The Central Bank’s Annual Report 2007 states that the registration of motor vehicles from 2006 to 2007 has declined.

Registration of buses declined by 21 per cent, private cars by 18 per cent, three wheelers 33 per cent and dual purpose vehicles declined by 33 per cent.

Commissioner, Department of Motor Vehicles, A. Wijeratne said the registration of certain motor vehicles dropped this year and this trend will continue.

Importers of vehicles said that while no one would undermine the importance of promoting local industries there should be an equal level playing field for all in the industry.

An analyst and Senior Chartered Accountant said that import restrictions through taxes will help support domestic industries and help the country to save foreign exchange.

				Salient features of transport sector 

  Item				2006		2007 (a)	Growth Rate (%)
								2006		2007 (a)
1. New registration of
   motor vehicles (Nos.)	300,522		297,892		30.9		- 0.9
   Buses			  3,346	 	 2,637		61.7		-21.2
   Private cars	 		 27,578		 22,603		59.6		-18.0
   Three Wheelers		 64,466	 	43,068		56.9		-33.2
   Dual purpose vehicles	  7,245	 	 5,193		 5.8		-28.3
   Motor cycles			156,626		182,508		19.8		 16.5
   Goods transport vehicles	 20,436		 18,408		43.3		- 9.9
   Land vehicles		 20,825	 	23,475		19.5		 12.7

2. Sri Lanka Railways
   Operated kilometers (‘000)	  7,800	 	 8,800		 3.0		 12.8
   Passenger kilometers (mn)	  4,311	 	 4,767(b)	 -1.1		 10.6
   Freight ton kilometers (mn)	    138	  	  135(b)	  2.2		- 2.2
   Total revenue (Rs.mn)	  2,491	  	2,999		 27.2		 20.4
   Current expenditure (Rs.mn)	  6,473	  	7,297	 	18.5		 12.7
   Operating loss (Rs.mn)	  3,981	  	4,297(b)	 13.6	 	 7.9

3. Sri Lanka Transport Board
   Operated kilometers (mn)	    262	   	 305	 	 1.3		 16.2
   Passenger kilometers (mn)	 12,871		 14,769	 	 1.6		 14.7
   Total revenue (Rs.mn)	 12,379	 	15,036		 23.5		 21.5
   Operating expenditure 
   (Rs.mn)			 14,921	 	17,001	 	16.5		 13.9
   Operating loss (Rs.mn)	  2,542	 	 1,966		  3.6		-22.7

4. SriLankan Airlines
   Hours flown			 67,255		 69,184	 	 5.6		  2.9
   Passenger kilometers 
   flown (mn)	 		 9,356	 	 9,841		  9.5		  5.2
   Passenger load factor (%)       76	   	    79	 	  2.8		  3.8
   Weight load factor (%)          59	 	    60		  1.7		  1.6
   Freight (Mt.’000)               98	  	    98		  8.9	 	  0.0
   Employment (No.)             5,362	 	 5,213		 -0.3		 -2.8

(a) Provisional (b) Estimates
Sources: Department of Motor Traffic,  Sri Lanka Railways, National Transport Commission, Civil Aviation Authority of Sri Lanka, SriLankan Airlines