Low quality vehicles flood the market - Importers

by Rohana Jayalal

Local consumers will face difficulties in buying good vehicles in the future as low quality vehicles are being imported, President, Vehicle Importers’ Association of Sri Lanka, Mahinda Sarathchandra told Sunday Observer Business.

The country’s foreign exchange reserves are wasted substantially and enormous costs are being incurred on fuel mainly due to huge traffic congestion experienced in Colombo and other main towns due to the indiscriminate import of motor vehicles. This also causes extensive environmental pollution.

The Customs Duty on vehicles was increased soon after the Government came to power in January.

Minister of Finance Ravi Karunanayake held several rounds of discussions with the Vehicle Importers’ Associations before the introduction of the new method of computing Customs Duty.

In the context of the country’s future, the decision was good, he said.

As a result of allowing the Rupee to float against the Dollar, the prices of imported motor vehicles increased.

With the introduction of thew new method of computing Duty on vehicles by the Finance Ministry, in September, the Government will streamline the system. However, there will be a significant reduction in imports of vehicles as well.

“We strongly believe that the Government should set up an efficient public transport system as soon as possible while imposing strict controls on the import of vehicles.

The price of vehicles imported to Sri Lanka from Japan and Europe went up, after the Customs authorities imposed taxes on deemed valuation, which is higher than that declared by an importer,” Sarathchandra said.

High taxes are imposed on small cars, while cars imported by State employees are taxed less and those legislators who introduce tax laws are given tax-free cars.

Following the introduction of new Customs Regulations on imported vehicles through Special Gazette Notification No. 1933/16 of September 22, authorities discontinued using the values supplied by importers when imposing taxes.

The price of a used Japanese car will go up between Rs. 300,000 - Rs.1.5 million rupees based on the new valuations.

A Toyota Axio and Acqu hybrid will go up by around Rs. 700,000. The price of a Prius will go up by around Rs. 1.2 million, Toyota Hiace petrol by Rs. 1,350,000, Toyota Aqua - Rs. 770,000, Toyota Hiace Diesel - Rs. 1,700,000, he said.

Earlier importers of used cars, who competed with the ‘sole agents’ of new cars had complained that the prices quoted by agents were over-valued and in Japan the vehicles could be purchased at lower prices. The value is based on ‘super grade’ full option units some of which are never imported to the country.

In this situation some importers have decided to bring ‘registered de-registered cars’ which are actually lightly used cars.

Second hand auction prices in Japan depend, in part, on demand in some countries with Sri Lanka being a significant player in the segment below three years.

The prices of used electric cars for example rose dramatically after a surge of imports by Sri Lanka.

The actual price paid for a car depends on the year of manufacture, mileage, condition and the number of options.

After taxes on hybrids were raised, used car prices at the auctions fell for about two months.

Deemed valuations which may over-value a car can be used as a tool to remit extra foreign exchange out of the country, analysts said. The lack of a depreciation allowance up to three years increases the price of vehicles.

The lack of a depreciation table also encouraged the import of new cars at a higher foreign exchange cost.