Sri Lanka FM defuses duty shock on used electric cars

ECONOMYNEXT – Sri Lanka’s Finance Minister Mangala Samaraweera Friday agreed to extend the substantial duty concession announced in the budget for new electric cars to used models too, particularly the popular Nissan Leaf.

In his otherwise progressive budget, Samaraweera had introduced a discriminatory clause which doubled the tax rate for used electric cars, even if the vehicle was just one-day old.

The local agent for Nissan has not imported brand-new Leaf cars and those coming into the country are purchased new in japan and deregistered a few days later and shipped to Sri Lanka as a "used" vehicle.

This type of practice has led to "zero mileage" vehicles which are actually brand-new, but brought in as "second hand" to side step the monopoly of authorised dealers who keep much higher margins than private importers.

The minister said his intention was to make electric cars more popular, but was also keen to make sure that Sri Lanka does not become a dumping ground for used junk.

However, it was pointed out to the minister that since the duty is based on the motor power of the vehicle and not on the cost or the age of the vehicle, importers preferred to get down newer vehicles.

The current duty duty system encourages the import of new vehicles, but dealers are able to get down ‘zero mileage" vehicles at substantially lower prices than the sticker price at authorised dealers.

While the government is trying to shift the cleaner vehicles, it was also pointed out to the minister that the authorised dealers of Japanese top brands  had in recent years taken out advertisements to discourage hybrids.

These top names warned local motorists that "zero mileage" hybrid vehicles will not be serviced by them. However, a thriving aftermarket has developed in the country.

Private importers introduced the Nissan Leaf to Sri Lanka about three years ago.

A duty reduction in early 2015, saw over 500 Leaf cars entering the island every month, but it tapered to just a handful by September this year mainly due to the lack of charging stations island wide.

The second-hand 2012 model had a theoretical range of 120 kilometres but practically did just about 80 kilometres on a full charge.

The newer Leaf models are said to have a range of 180 kilometres on a single charge, but users say they get only about 100 kilometres and Sri Lankan Leaf drivers suffer from what is globally known as "range anxiety."

Sri Lankan dealers said they have seen a sharp decline in the demand for the Leaf in the past two years as word spread about range anxiety.

Many Leaf drivers return home sweating, unable to use the air conditioner for fear of running out of battery power.

The declining demand for Leaf electric cars had a serious knock-on effect on the second hand electric car market. The 2012 model had dropped to about two million rupees before Thursday’s slash of duty by one million rupees.

A new Leaf model with a range of 400 kilometres is already available in Japan at a price tag of 3.15 million yen (around $29,000). (COLOMBO, November 11, 2017)