Allow vehicle imports on quota basis to revive industry - CMTA | Daily News

Allow vehicle imports on quota basis to revive industry - CMTA

CMTA President Charaka Perera. Picture by Wimal Karunathilaka
CMTA President Charaka Perera. Picture by Wimal Karunathilaka

The import ban imposed in March 2020 on motor vehicles continued for the 34th month and to revive the industry the Government must focus on allowing vehicle imports at least on a quota basis, after imposing importer, industry regulations and ensuring the inflow of genuine spare parts to move the industry forward, Charaka Perera, Chairman, Ceylon Motor Traders Association (CMTA) opined participating in an interview with the Daily News.

He said the lending rates in the next two months will go down to about 20% and with that leasing rates will also come down and then it will be more affordable for the people and if even a limited number of vehicles are allowed to be imported under a quota system from the second half of the year their businesses would be able to survive because they will be able to sell in the market within the next few months. However, he said this should be done after enforcing stringent importer and industry regulations.

Import suspension

With the import suspension that took place in March 2020, he said most of their businesses crippled. The motor industry was at that time employing over 30,000 directly and they had nearly 6,000 SME businesses around the country which were relying on the motor industry doing repairs and services. Today the members are finding it very difficult to sustain employment and the industry has lost a lot of employees and some have been sent on VRS schemes. He said the consumers too have suffered due to the suspension, with vehicles doubling in price. Used vehicles in the second hand market have doubled and a scooter for example which was sold in 2019 at Rs 300,000 is sold at Rs 600,000. With prices doubling and lending rates increased up to 30% the motor sector is going through the worst time period that they have seen over the last 100 years, Perera said.

Annual Import Bill and quota system

However, he said this could have been handled in a different way and in 2019, which was the last year that open imports were allowed the whole sector required only USD 815 million to import all vehicles, but the annual import bill of the country was USD 19.9 billion on all types of imports according to Central Bank statistics. Total vehicle imports were therefore only 4% of the annual import bill of the country. Instead of suspending vehicle imports of USD 815 million, the Government could have given a quota system for all the industries and sustained all the industries, the CMTA President pointed out.

The Government spent USD 275 million on finished garments, USD 206 million on home appliances, USD 171 million on household items, USD 214 million on sea food and USD 115 million on spice imports in 2019. If these figures were added it would amount to over a billion or maybe 2 billion. He said their proposal to the Government was to cut down 50% of that and give them 50% of the total vehicle export figure of USD 800 million which is USD 400 million. He said COVID spread mainly because of public transportation and if this USD 400 million was allocated they could have imported 2 wheelers, 3 wheelers and even small vehicles and offered it to the public for reasonable price and that would have prevented the huge price increases in vehicles and protected the people from the pandemic as well.

Mobility sector and infrastructure

Perera said the Lankan mobility sector lacked the required regulations and over the years CMTA have been pushing for regulations for import, public sector and assembly operations but it has not happened. He however said that they now see a turn where the authorities were also coming in line, and the CMTA was working closely with them.

The facilities and infrastructure available in Sri Lanka for public transport is not to the extent or level that it should be and as a result a high demand for public - personal transport like 2- Wheelers, 3-Wheelers, passenger cars and even small trucks have arisen. And there is a need of at least 4 million 2-wheelers, 1.5 million passenger cars and SUVs and in addition to that more 3 wheelers and buses because the public transport is not in good order.

“Generally the yardstick in the globe is how many vehicle units for every thousand people. In countries like Thailand and Vietnam, where the 2-Wheeler market has saturated, they have about 600, 2-wheelers, for every 1,000 people, but we have only 250. So, we have a long way to go to get to the saturation point. If you take passenger cars, developed countries like the USA have about 900 passenger cars for 1,000 people and if you take Western Europe, it's about 600 passenger cars for every 1,000 people, but in Sri Lanka it is only 40 passenger cars and SUVs for 1,000 people, so the situation with our policy-makers and decision-makers are that they don't look at actual factual numbers. They just look at the Colombo congestion and say that there are too many vehicles on the road and have jacked up the duty. Even before the suspension of vehicle imports the duty itself for 2-wheelers was about 100% and 200% for 4-wheeler, so the ability for a consumer to purchase a basic 2-wheeler, 3-wheeler or a passenger car had also been made difficult. On the other hand, the authorities haven't done their part in expanding the public transport properly to be able to get a safe, reliable on time passenger public transport.”

Ageing population

Moreover, the country has about 8.2 million total vehicles and nearly 50% of this population is over 10-years-old. With the vehicle population ageing there are inherent costs in terms of maintaining and repairing those vehicles and indirect costs that incur due to accidents. Therefore the public sector mobility and facilities have to increase, and the country must move to on time safe transportation methods for people and there is a huge capacity to fulfill even in personal vehicles, the CMIA Chairman said.

Introduction of Electric Vehicles

Elaborating on the introduction of Electric Vehicles (EV) he said that Sri Lanka definitely had to look at electric, but it should be a planned approach and sorting out problems and within the next three to five years the country should move towards electric imports. He however asserted that although the majority should be electric there should be some sort of high focus on hybrids and even hydrogen, which is another option in the market at the moment. He however said a proper roadmap should be introduced for this purpose and the required infrastructure and regulatory mechanism introduced prior to introducing EVs to the country.

Vehicle scrapping policy

Sharing his views on getting rid of obsolete vehicles on the road, Perera said that they have spoken to the Transport Ministry and suggested implementing a vehicle scrapping policy which has been implemented in certain countries. He said vehicles other than the antique ones, once they become older there should be some sort of incentive for the owner to scrap the vehicle and then the incentives given back to them when purchasing a new vehicle, so that the owners will have some sort of methodology to move on, so that the country doesn't become a graveyard of old vehicles. He said 50% of the vehicles in the country were over 10 years old at the moment and in a five year period they will be 15-years-old.

Policy decisions

With regard to policy decisions, Perera said over the years most of the policy decisions on the motor trade has been taken by the Government without consulting the industry, and that was a fact not only for the motor industry, but for most of the industries and not just one Government but successive Governments have been doing that. But he said that currently with all these issues that took place in the last one year or so they have seen that the Government officials, secretaries and below have been quite positive towards discussions and very open to ideas and wanted to get it right this time. Perera said he was happy to say that the current authorities were very much in discussion with them.

SIAM and Road Map

The CMTA President said they were in fact trying to bring down a team from the Society of Indian Automobile Manufacturers (SIAM) which is an organisation in India which is made of members of all the global manufacturers. He said that SIAM was also very supportive and they are trying to have a team down from SIAM to discuss with the Government officials on how the road maps are done, how the road map was done in India because majority of the vehicles which are brought into Sri Lanka are manufactured in India. Even in 2019, up to the import ban, although the brands may be from Japan or other countries, but were manufactured in India. Because of that Sri Lanka aligning its automotive policy with India makes sense.

He said it need not be replicated but the industry have to have some alignment because majority of the vehicles were coming from there and they a getting the SIAM team down to support this cause and although at the moment a national policy was not available but last month the Ministry of Transport started making a National Policy which was a very good sign and CMTA have also been invited to the table to discussions they were working closely with the Minister Transport and believe that it will come out soon. In addition to that CMTA had contracted KPMG to develop an automotive road map for Sri Lanka last year and they were in the process of finalizing it and intend to present it to the Government within the next few months.

Brain drain

Perera said a lot of technical staff of the motor industry was moving out of the country and these were people they trained either in Sri Lanka or by their principals overseas.

“They have gone through extensive training and we have built them over the years with that training. Now it's very easy for them to get a job in either the Middle East or any other country as a technician or a supervisor or a technical head.”

He said to overcome this they were closely working with the Government and officials to ensure that they get their business back on track by allowing imports at least on quota basis and also regularize spare parts supply and also to prevent non-genuine imports coming in, so that their member businesses can move forward properly. At the moment he said they were going back.

“With that happening, we believe our members will be in a position to at least pay something more and hold these people, because otherwise without profits, how can you pay something? And at the current inflation rate, even if you double your salary, it's still not enough. So obviously companies can't double the salary when the revenue is declining month on month. So that's one thing that we are trying to do, get the authorities to support and get the business moving, Perera added.


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