Electric future

Budget 2015 had good news for the motor industry in the form of a unified tax and duty structure, which was warmly welcomed by all vehicle importers in Sri Lanka. Earlier, they had to pay a multitude of duties and taxes at various points, which complicated the sales process. With this new simplified and more transparent structure, it will be much easier to calculate and pay the taxes and duties at one given point.

One result of this decision as well as the reduction of VAT to 11 percent is that vehicle prices should go down marginally for most categories of vehicles. However, some categories such as 1000 CC, saw a marked reduction of over 25 percent which should see a saving of around Rs.450,000.

Vans with 13 or more seats also saw a significant duty reduction, which should make them cheaper by around Rs. 1 million or more in some cases. Duties and taxes on all-electric cars will be reduced by around 10 percent, a move that should make them cheaper to buy.

These are very sound decisions, because the cumulative taxes and duties on motor vehicle imports used to be among the highest in the world at over 200 percent for petrol vehicles and 300 percent for diesel vehicles depending on engine capacity and type of vehicle.

This naturally led to a decline in sales of certain categories of vehicles such as vans, needed by the tourist industry, commercial establishments and private users. There was also a potential loss of revenue due to the reduced sales figures. More people will now be able to buy brand new vans, which is likely to be a boon especially for the tourist and school/staff trip industries. Indeed, some of the vans used to transport schoolchildren are very old rust buckets well past their prime.

Imports

The authorities should be commended for taking several far-reaching decisions vis-à-vis motor vehicle imports, whilst also encouraging the local assembly of vehicles for local and export markets. The granting of motor vehicle import permits for government servants was a commendable step and we are told that it will be extended to cover certain other segments as well. The Government should also be lauded for granting duty concessions for the import of hybrid vehicles, which can potentially save millions of rupees worth of petrol or diesel as the case may be.

It is good for the Exchequer as well as for the environment, due to reduced emissions. In fact, a majority of vehicles imported and sold today in the local market are hybrids such as the Toyota Prius C/Aqua and the Honda Vezel.

It has also had another positive effect: almost all the hybrids imported to the country are brand new zero mileage specimens. This has almost ended the importation of so-called reconditioned cars, which are cars used in Japan or Singapore for a couple of years and imported here on an as-is condition. These cars could have many mechanical and emissions problems, but brand new cars present no such fears.

But the biggest applause should be reserved for the further reduction of duties and taxes for all-electric vehicles.

Currently, there are only a few such cars in the global market - the Nissan Leaf, Nissan e-NV 200, BMW i3 and i8, Tesla Model S/D, Mahinda Revo, Leopard and Mitsubishi Miev, almost all of which are available in the local market, albeit not always through official channels.

The sole agents for some of these brands/cars want to train their staff and ensure better charging infrastructure before bringing them down officially, but in the meantime third party importers are happy to sell them to eager buyers who just cannot wait.

Indeed, the Government should also consider duty rebates or waivers on home and industrial charging units, some of which are solar powered and hence do not require mains electricity. It is vital to ensure that charging points are installed islandwide, because some electric cars have a limited range like 180 Km per full charge.

The reason for encouraging the use of renewable energy to power electric cars is obvious.

The whole purpose of buying and using an electric car is to avoid the fuel pump, but if use the mains electricity at home to charge the car, there is a chance that you might be using thermal energy generated by using diesel to do so.

It can negate the very purpose of having an electric, because you are basically still using fossil fuel, albeit indirectly. But solar or other renewables do not pose this dilemma, making it 100 percent carbon neutral.

Access

The Government should take a leaf out of Norway, which has the highest number of electric cars in the world, and introduce more incentives to popularise electric cars. The Norwegian Government exempts electric car owners from paying sales tax when buying a new car, a tax which can be 100 percent of the sticker price of the car.

Then it offers plug-in car owners free parking and charging in all of Norway’s major cities. Finally, it grants electric cars automatic access to bus lanes, allowing electric car owners to avoid traffic jams and commute more quickly in the rush-hour. These incentives - designed to help Norway achieve a goal of at least 50,000 electric cars on the nation’s roads by 2017 - have long been considered the gold standard of plug-in car incentive programs, and have been so successful that they incentive program may hit its 50,000 vehicle target as early as next year.

The Government should also consider extending this duty concession to plug-in hybrid cars such as Mitsubishi Outlander PHEV and the Porsche Panamera, which are in essence hybrids with a mains chargeable battery. They are more efficient than all-electrics and normal hybrids – some plug-in hybrids claim full-efficiency figures of 60 km per litre and one does not have to worry about range.

Even if the real world figure is only half of that, just imagine the fuel savings in the long term. The case for more electrics on our roads is thus rock solid.