Sri Lanka auto registrations up 95-pct in June amid cheap credit
ECONOMYNEXT – Sri Lanka’s vehicle registrations rose 95 percent to 95,624 in June 2015 from a year earlier, driven by state interventions including low interest rates and tax cuts, an analysis by an equities research house shows.
Car registrations hit an all-time high of 7,641 units up 238 percent from a year earlier, JB Securities, a Colombo-based brokerage said in a research unit.
Car imports started to pick up in the last quarter of 2014 as credit recovered. After January, sales of small cars rose further following a tax cut in January.
Brand new car registrations rose to an all-time record of 4,358 units in June, up 540 percent from a year earlier. Indian-made Maruti cars were 3,470 units, with the Alto model, Sri Lanka’s best-selling car, making up 2,344 units.
The Chinese-made Geely Panda, badged Micro Panda in Sri Lanka also saw sales of 545 units up from 394 units a year earlier.
Around 70 percent of small cars were financed by credit, JB Securities said.
Car registrations are also driven by lower taxes in hybrids compared to even small conventional cars in another state intervention, despite a January rise in taxes of hybrid cars.
Hybrid registrations rose to 3,377 units in June up from 2,756 a month earlier and up from 1,491 a year earlier, before credit recovered in 2014. Financing was 68.1 percent.
In this 2015 there has also been a surge in motorcycle registrations following privileges given by the elected ruling class to tax-spending state workers discriminating against ordinary citizens during the run-up to presidential polls.
Motor cycle registrations rose 81 percent to 30,222 units in June from a year earlier. Three wheeler registrations also rose 81 percent to 11,349 units. JB Securities says three-wheelers are now increasingly used as a personal transport vehicle, rather than only as a taxi.
However all vehicles imports are now driven by cheap credit, with interest rates artificially held down by liquidity injections by the Central Bank, despite a rise in state credit mostly taken to finance a sharp rise in state worker salaries which has pushed up consumption in the economy.
Though all state interventions can have multiple perverse, unintended consequence, manipulating interest rates down through a central bank is the most dangerous of all interventions.
Though the rise in vehicle imports, especially motor cycles shows a welcome improvement in living standards of ordinary people, especially in rural areas and women in particular who are using scooters, in some urban areas congestion has cropped up.
In Sri Lanka due to lack of reasonable quality and fast urban transport system, people tend to use personal transport to commute to work. People are packed by sardines in small busses, while all policymakers travel around in cars telling why everyone else should use public transport.
The last administration built roads, improving infrastructure as other administrations in more advanced countries did during the last century.
Building roads and paving way for people to achieve their requirements as best decided by them is an important way rulers can respond to the decisions of the people, as has happened in freer countries.
The last administration also planned for a light rail system, a high quality and fast system of transport which makes people abandon cars without any coercion or violence of the state being used against them.
Some freedom advocates say Sri Lanka’s rulers, backed by interventionist policymakers, had used their coercive powers to prevent urbanization, in the past second guessing the economic decisions of individuals in the past and held back the people in a pastoral society for decades. (Colombo/July20/2015-Upate II)