Vehicle imports decline by 21% in 2012

The vehicle imports statistical analysis of the Ceylon Chamber finds that the expenditure on import of vehicles and parts has declined by 21% in 2012.

This is after experiencing robust growth of over 200% in 2010 and 86% in 2011. Expenditure on vehicle and parts imports accounted for 8% of total imports in 2012 compared to 10% in 2011.

A number of factors contributed to this decline. The Government increased excise tax on vehicles in March 2012 to discourage imports expecting that to help curtail the widening trade deficit.

In addition to that during the first quarter of the year, the rupee experienced a sharp decline following the decision taken by Central Bank to stop intervening in the forex market, the Central Bank imposed a credit ceiling on loans extended to private sector and along with the rising inflation, the cost of borrowing increased and the fuel prices experienced a sharp upward revision. All these developments negatively impacted the demand for vehicles in the country.

The year 2012 had commenced with buoyant demand for vehicles. The vehicle registration data indicate that during the first quarter the number of vehicles registered in fact is higher than the number registered the previous year. The impact of the negative developments had started making dents into the market from second quarter onwards.

The concessionary vehicle permits issued by the Government as well as sale of remaining stocks may have cushioned the negative impact to some extent. For example, there was a massive increase of 227% of diesel passenger vehicles between 1500 cc and 2500 cc (HS 87.03.32) imported into the country in 2012 due to the utilisation of concessionary vehicle permits issued by the Government.

This is in spite of the upward revision to excise tax leading to an increase in the total tax rate on diesel cars with engine capacity of 1600-2000 by 250% to 275% and those with engine capacity of 2000 cc to 2500 cc from 267% to 300%.  In fact this was the only vehicle category that recorded an increase both in value and quantity in 2012.

Several vehicle categories recorded a steep decline of above 50% in terms of quantity imported in 2012. These are small passenger vehicles of less than 1000 cc (HS 87.03.21) and passenger vehicles between 1000-1500 cc (HS 87.03.22) both of which declined by 72% each, passenger vehicles exceeding 1500 cc but below 3000 cc (HS 87.03.23) declined by 65%, passenger vehicles exceeding 3000 cc (HS 87.03.54) declined by 77%, hybrid electric vehicles declined by 67% and diesel auto-trishaws declined by 55%.

India continued to dominate the market for imported vehicles in 2012 accounting for 50% of the total imports. Japan has been steadily losing its market share in Sri Lanka. In 2012 the market share of Japan further declined to 22% compared to 36% in 2011. This decline in vehicles from Japan could be partly due to shift in production facilities by the Japanese companies to other Asian countries such as India and Thailand.

In addition to that high taxes which make Japanese vehicles less affordable to average Sri Lankans also would have contributed to a shift in demand from Japanese vehicles to low cost Indian and Chinese vehicles. China is the third leading supplier of vehicles to Sri Lanka and its share has increased from 5% in 2011 to 7% in 2012.

The detailed analysis of import of vehicles by vehicle category and country of origin is available for sale at the Ceylon Chamber of Commerce.