ECONOMYNEXT – Sri Lanka’s three wheeler population has topped one million in July 2015, the latest data shows with surge of imports driven by cheap credit and money printing by the Central Bank.
Sri Lanka had 929,495 three wheelers registered by the end of 2014, according to data from the Department of Motor Vehicles, with 79,038 vehicles being imported in that year.
Up to July 2015, with only seven months being passed, 73,805 three wheeler have been registered, data analysts by JB Securities, a Colombo-based showed. Indian-made Bajaj is the market leader in Sri Lanka.
Three wheelers taxis are a key part of Sri Lanka’s public transport network, especially after dark when buses stop operating due to state mandated fares which do not permit night fares.
Three wheelers are also important in rural areas, where bus services are infrequent. State controls and licensing prevents smaller owners of smaller vans with slightly higher prices offering bus services in rural areas though some run passenger services using small tractors.
But of late people including craftsmen and small business owners, and households who cannot afford cars are buying three wheelers for personal use. They also do some taxi runs part time, boosting productivity.
The market has also innovated a number of call-centre driven three-wheeler taxi networks. Fortunately there is no state price regulation on the sector there is free competition.
As a result call centre driven taxis are priced at 30 rupees a kilometre compared to 40 rupees for standalone taxis. Most taxis are now metered and passengers shun those without meters.
Unlike public transport, personal vehicle ownership of even a motorcycles gives mobility, enormously boosting productivity and reducing time lost. It also improves quality of life, and moves people out of a poverty cycle.
Sri Lanka’s motorcycle population which totalled 2.98 million in 2014 also exceeded three million in 2015 to reach 3,202,333 by July. A part of the increase has been driven by motor cycle ownership in the former war zones in the north and east where people are rebuilding their lives.
Sri Lanka has 20 million people and a little over five million households. The registered vehicle population including commercial vehicles reached 5.6 million in December 2015, though each year vehicles also go out of service. Up to July 372,658 vehicles have been registered.
Increasing private ownership of motorcycles and three wheelers can reduce the need for taxis and public transport and create a demand for higher quality public transport in cities such as mass-rapid-transit systems.
But this year’s surge in three-wheeler imports is part of a phenomenon seen across the economy, with imports rising to unsustainable levels, driven by an expanding budget deficit which has been accommodated by Central Bank money printing and a policy rate cut.
This year between 10,000 to 12,000 three wheelers a month have been registered after March 2015, around the same levels as the 2011/2013 credit bubble and balance of payments crisis.
Tax-spending state workers have also been given cheap motorcycles, in another state intervention.
Sri Lanka’s car imports started to rise from the third quarter of 2014 and has continued to accelerate through this year, driven largely by credit.
The monetary authority has injected rupee reserves to the banking system both by releasing more than 300 billion rupees of excess liquidity (representing unspent savings from 2013 and 2014) and freshly minted money in 2015.
In 2015, 91 billion rupees has been printed over the last two months alone, to resist market interest rates rise and drive credit and imports higher, generating balance of payments pressure and foreign reserve losses. (Colombo/Aug31/2015)