Sri Lanka's United Motors eyes commercial, earth moving vehicles as car sales fall
Jul 08, 2019 15:06 PM GMT+0530 | 0 Comment(s)
ECONOMYNEXT - United Motors Lanka, agents in Sri Lanka for Mitsubishi automobiles, has said it diversifying into commercial and earth moving vehicles as passenger car sales slow and profit margins get thinner.
The company has reported lower sales and profits in the last financial year owing to the fall in demand for vehicles after import duty hikes and restrictions.
United Motors Lanka (UML) chairman Sunil Wijesinha said the company’s core business of import and selling of motor vehicles has been under stress for the past few years as result of the ad hoc policy changes coupled with rising local and international ‘Eco political’ uncertainty.
“We see more prospects for commercial and earth moving vehicles than for passenger cars,” he told shareholder in the firm’s annual report for 2018-19.
“We realise that we are in a competitive market segment which has narrow profit margins and is sensitive to policy changes, and are adjusting our approach accordingly.”
Wijesinha sees growth prospects for UML’s newest subsidiary, UML Heavy Equipment Limited, in the near future with the improved performance of the construction sector once stability is restored.
“There will be less demand for passenger vehicles as new modes of transport come into effect and disruptive technologies drive the automotive and transportation industry of tomorrow,” he said.
Government policy changes, coupled with the depreciating rupee and the strengthening yen, continue to keep investment in a motor vehicle beyond the reach of a quarter of the country’s upwardly mobile consumers, Wijesinha said.
It also actively discourages more expensive motor vehicles imports.
Last year had been a challenging year for global car market as sales fell for the first time since 2009.
“The events that transpired in the local and global arena were foreseen by your company well in advance, and we have re-looked at our own position, considered our vulnerabilities, and now shifted gear to explore new avenues of business that compensate for falling margins,” Wijesinha said.
UML has diversified to less turbulent industries in pursuit of emerging market opportunities outside the automotive industry.
The report said Sri Lanka’s automotive industry continued its deteriorating trend in sale of brand new motor vehicles, over the past few years.
Sales of brand new cars dropped further during the year to 8,286 units, from 10,400 units sold in 2017/2018, a 20.3 percent decrease over the previous year and a significant drop of 83.8 percent or 42,920 units from the 51,206 units achieved four years ago in 2015/16.
According to the 2019 KPMG Global Automotive Executive Survey, 43 percent of the respondents believe that half of car owners will no longer want to own a personal vehicle by 2025.
They cite the most important reasons for this as being living circumstances, followed by total cost of ownership.
(COLOMBO, 08 July, 2019)