Sri Lanka car market stalls as duty increase hits demand
ECONOMYNEXT – Sri Lanka’s main car dealers were offering pre-budget prices for fleets of vehicles in stock, but the demand had virtually dried up both in the new and second-hand markets, dealers said Sunday.
United Motors took out advertisements offering Eclipse and Xpander models at the pre-budget price with a saving of 1.6 million on the new customs duty rate. Mercedes-Benz agent Dimo said it was selling the French-made Citan at the pre-budget price of 6.8 million.
Unregistered car dealers – US car Sales, Sachin Auto, and Lekhraj and Sons – also advertised their stocks at old prices while many private sellers too tried to move their stocks at pre-budget prices.
“Before the budget, we have very little demand, but when the taxes were increased, even that demand seems to have evaporated,” a dealer at Stanley Thilakaratne Mawatha, said.
He said lack of demand was seen in the second-hand market too.
“Prices should have gone up when the rupee depreciated, but that didn’t happen. In fact, second-hand prices have come down sharply because it is now a buyers’ market. People don’t seem to have money for investing in wheels,” he added.
Under the new duty structure, the popular Suzuki Wagon R model will cost an additional 250,000 rupees while cars in the 1,000 to 1,300 cc category will cost half a million more. But, for the stocks imported before the budget, there was no apparent increase, according to dealers.
Higher-end models such as the entry-level Mercedes C class would cost about four million rupees more.
Finance Minister Mangala Samaraweera in a bid to encourage environmentally cleaner electric cars, slightly reduced taxes on electric vehicles, but the concession was for vehicles with a motor power of less than 100 kilowatts.
However, there is no EV imported into the country currently with a motor less than 100 KW. Minister Samaraweera told reporters last week that he will ask his officials to look into the issue.
The second-hand EV market was almost non-existent after a previous duty cut shaved off nearly 50 percent of the value of cars already in the country. The Nissan Leaf, which cost 4.5 million rupees in 2014, is now worth less than 1.5 million rupees, partly due to loss of battery capacity and regular duty reductions.
A Leaf owner in Galle advertised his car for sale on Sunday at 1.4 million and said he was ready to negotiate the price further down, underscoring how electric vehicles have failed to take off in the country. (COLOMBO, March 10, 2019-SB)