Vehicle registration hits all-time high

Sales may drop after Budget:

Vehicle sales may drop after the presentation of the 2016 Budget and then stabilise but at a lower rate, Managing Director, Carmudi Sri Lanka, Firaz Markar told the media on the release of its survey results on the vehicle leasing industry in Sri Lanka.

He said the registration of new vehicles hit an all-time high of 4,990 vehicles in August this year compared to the previous year. Sales were on an upward trend this year with tax concessions but worry over tax hikes in the forthcoming Budget put an halt to sales over the past two months.

Buyers are adopting a wait and see approach until the Budget is presented on November 20. They are not willing to make any commitment as the price of a vehicle may go up with tax increases on the cards, Markar said.

Following the general elections in August, sales have been stagnant as dealers did not give a fixed price for vehicles, merchants said. The price varied from dealer to dealer. The change in the method of valuation has increased prices resulting in a slump in sales.

Vehicle merchants have been lobbying for a stable and transparent policy that will help the industry and the country as well. However, the efforts of vehicle merchants reaching some fruition is still to be seen.

There is a demand for vehicles but sales have not grown due to dealers not giving a fixed rate for a vehicle.

A car which was priced at Rs. 36 lakhs is today priced between Rs. 36-40 lakhs. Buyers will know the exact price after the Budget, Markar said.

Vehicle importers said the devaluation of the rupee and the tax hike on Japanese vehicles had adversely affected sales. "We hope there will be a policy revision in the Budget," an importer said.Merchants said the future of the vehicle industry in Sri Lanka would be a mix of hybrid and electric vehicles.

However, the limited number of options for electric vehicles in the country would have an effect on demand for electric vehicles unlike hybrids which have a wide range of options.

Markar said online marketing of vehicles has increased and helps the buyer to identify his or her preference. Online web portals facilitate trade.Carmudi.lk, a pioneering online vehicle retailer launched operations in 2013. The company released its ground-breaking research results on the recent performance of the Sri Lankan automotive industry.

Steady GDP growth, access to low cost credit and the rising level of affluence within major demographics of society have combined to generate an unprecedented level of growth within the Sri Lankan automotive industry, the report said.

Registration of small cars, hybrids and electric vehicles has increased. Small cars account for around 94 percent of new vehicle registrations.

Markar said potential changes to vehicle taxation policies and a reversal on the downward interest rate momentum could tip the balance of vehicle financing in favour of an alternative model where consumers may be forced to take on a larger proportion of the total cost of the vehicle, potentially signalling a shift in conditions for finance companies and banks.

"We will monitor the market over the next few months as dealers adopt a wait and see approach towards the vehicle buyers' intent.

We expect the market to return to normal over the following month or so with sales expected to be largely within vehicles in the lower price brackets," Markar said.