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India ousts Japan as largest vehicle supplier to Sri Lanka.
[18 February, 2013]

India ousts Japan as largest vehicle supplier to Sri Lanka.India has ousted Japan from the latter’s long, established pedestal as the single largest supplier of vehicles to the Sri Lankan market.

According to the Ceylon Chamber of Commerce (CCC), India continued to dominate the market for imported vehicles in 2012 accounting for 50 per cent of the total imports. Japan, the CCC said, has been steadily losing its market share in Sri Lanka. In 2012 the market share of Japan further declined to 22 per cent compared to 36 per cent in 2011. “This decline in vehicles from Japan could be partly due to a shift in production facilities by the Japanese companies to other Asian countries such as India and Thailand. In addition to that high taxes which make Japanese vehicles less affordable to average Sri Lankans also would have contributed to a shift in demand from Japanese vehicles to low cost Indian and Chinese vehicles,” the CCC statement to the media said. China, it said, is the third leading supplier of vehicles to Sri Lanka and its share has increased from 5 per cent in 2011 to 7 per cent in 2012.

Meanwhile Sri Lankan expenditure on vehicle imports and parts has declined by 21 per cent in 2012.

This is after experiencing robust growth of over 200 per cent in 2010 and 86 per cent in 2011. Expenditure on vehicle and parts imports accounted for 8 per cent of total imports in 2012 compared to 10 per cent in 2011, according to a vehicle imports’ statistical analysis by the CCC.

It said a number of factors contributed to this decline which included an increased excise tax on vehicles in March 2012 to discourage imports expecting that to help curtail the widening trade deficit

In addition to that during the first quarter of the year, the rupee experienced a sharp decline following the decision taken by Central Bank to stop intervening in the forex market, the Central Bank imposed a credit ceiling on loans extended to private sector and along with the rising inflation, the cost of borrowing increased and the fuel prices experienced a sharp upward revision. “All these developments negatively impacted the demand for vehicles in the country,” the CCC added.

The year 2012 commenced with buoyant demand for vehicles and the vehicle registration data indicated that during the first quarter the number of vehicles registered in fact was higher than the number registered the previous year. However the impact of the negative developments began making dents into the market from second quarter onwards.

The concessionary vehicle permits issued by the government as well as sale of remaining stocks may have cushioned the negative impact to some extent, the chamber noted. For example there was a massive increase of 227 per cent of diesel passenger vehicles between 1500 cc and 2500 cc imported into the country in 2012 due to the utilization of concessionary vehicle permits issued by the government. “This is in spite of the upward revision to excise tax leading to an increase in the total tax rate on diesel cars with engine capacity of 1600-2000 by 250 per cent to 275 per cent and those with engine capacity of 2000 cc to 2500 cc from 267 per cent to 300 per cent. In fact this was the only vehicle category that recorded an increase both in value and quantity in 2012,” it said.

Several vehicle categories recorded a steep decline of above 50 per cent in terms of quantity imported in 2012. These are small passenger vehicles of less than 1000 cc and passenger vehicles between 1000-1500 cc both of which declined by 72 per cent each; passenger vehicles exceeding 1500 cc but below 3000 cc declined by 65 per cent; passenger vehicles exceeding 3000 cc declined by 77 percent, hybrid electric vehicles declined by 67 percent and diesel auto-trishaws declined by 55 percent.