EconomyNext – Sri Lanka’s second-hand car registrations hit a record high in January, mainly driven by hybrids, although higher import duties in the government budget could hit future volumes, an analysis by an equities research report shows.
JB Securities said in a report using data Sri Lanka Customs data that brand new vehicle registrations remained high, mainly of Indian-made Marutis which are likely to rise given import duty cuts in the January 29 budget.
A comment accompanying the analysis said the duty hike on hybrids was justifiable "in the name of social equity" since private car and SUV use is too small to reduce fuel consumption.
JB Securities also called for the urgent imposition of congestion charges on vehicles on the roads at peak times in defined areas, given worsening traffic jams brought about by the flood of vehicle imports.
Budget provisions restricting the freedom of individuals to import their own vehicles and scrapping depreciation tables appeared to be the work of "vested interests" – new car and large car importers, it said.
In January 2015 registration numbers on most categories "went off the charts," JB Securities said. "Like any great party it had to end with the punch bowl been taken away on January 29, 2015."
The research report said that in the motor car segment total registrations in January hit 4,928 units, up from 4,311 units in December and 1,958 units 12-months ago.
"Hybrid vehicle registrations were off the charts recording 4,299 units in January up from 3,649 units in December and 915 units 12-months ago," it said.
Cars accounted for 2,931 units and SUVs, being mainly Honda Vezels, accounted for 1,368 units.
The report said that the argument against the 30 percent import tariff hike on hybrids in the January 29 budget in the name of promoting energy efficiency "really does not hold up for it is applicable to only 10 percent of the total volume of fuel consumed."
It noted that according to the interim budget the Treasury hopes to raise seven billion rupees through increases in hybrid taxes, while the relief given on nine food items by lowering tariffs will cost the treasury nine billion rupees.
"Taxing food is regressive. NOT so vehicles. Thus if you offset these two items this is one tax increase that we can all live with in the name of social equity," JB Securities said.
Electric cars recorded 15 units, mostly Nissan Leaf, in January, up from 10 units in December and four units 12-months ago.
The January 29 budget reduced tariffs to five percent which should lead to a "significant growth" in this category in the months ahead, the report said.
Sri Lanka’s energy ministry said Monday it wants to set up an island-wide network of charging centres for electric cars with the help of private business and households, with a special off-peak power tariff.
JB Securities said the brand new vehicle segment recorded 1,865 units in January, slightly down from 1,939 units in December but up from 643 units 12-months ago.
Maruti recorded 1,361 units in January up from 1,100 units in December, the main driver being the Alto recording 1,159 units, with duty reductions in the previous 2015 budget together with lower cost of funds the main catalyst.
"The further duty reductions in the interim (Janaury 29) budget will boost numbers. In this segment small cars account for 80 percent of volumes."
JB Securities said pre-owned cars recorded 3,063 units in January up from 2,372 units in December and 1,315 units 12 months ago.
"The figure in January is an ALL time record mainly driven by hybrids," the report said. "Financing share was 62.4 percent indicative of credit fuelling demand."
Toyota recorded 2,001 units (Aqua 946, Prius 428, Axio 472) and Honda recorded 980 units (902 Fits).