Sale of vehicles likely to drop by 60-70%

Vehicle importers were in a quandary this week with one section insisting the government needs to remove the age of imported vehicles to one year while others believe there is a necessity to phase out used car imports. But both were against the government recent tax hike on motor vehicles and opined it could result in a 60-70% drop in sales in the future.

Vehicle Importers’ Association (VIA – reconditioned vehicles) President Yoga Perera said they had requested the government not to impose the one year age of imported vehicles as it would result in closure of businesses for used vehicle importers.With around 2000 reconditioned vehicles stuck at the Colombo port and 6000 ordered, the association wants measures taken to ensure those imported and ordered prior to the imposition of the new duty structure and vehicles already ordered for could be provided at the earlier price.

The VIA submitted their request to President Mahinda Rajapaksa and believes a favourable solution would be forthcoming. Reconditioned vehicles imported in 2010 amounted to 37,000 whereas in 2009 it was at only 3,400.

While some consumers who have already paid advances would find it difficult to pay the difference of the duty recently imposed; others have not opened LCs since the new tax was imposed, they said. The new duty imposed results in a small vehicle increasing by approximately Rs.1.2 million while others had gone up by at least approximately Rs.1.6 million, importers said. Ceylon Motor Traders Association (CMTA) President Tilak Gunasekara told the Business Times that there is a need to phase out used vehicles in this country. In fact, he believes the government would unlikely change the one year age of imported vehicles already imposed. Mr. Gunasekara said they understood the government’s situation but believed the rate of increase was “irrational.”

Taxes were previously hiked to similar levels in 2006/2007and which then dropped in 2009. At the time the imports indicated a drastic drop only in 2009 when it came down to 18,021 compared to 41,542 in 2008. The figure in 2010 reached 61,253 after the government imposed new tax structure wherein the duty on motor vehicles was relaxed considerably.

The recent hike in taxes was significant, Mr. Gunasekara said and explained that taxes on cars below 1500-2000 cc was previously increased only by 20%; but this time the current duty of 120% has been increased by 80%. This has also impacted on cars from 800-2000 cc. He also pointed out that the depreciation of the rupee has also affected the industry.


Courtesy: ST Online