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ANALYSIS: Sri Lanka Car Market 2024

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DeepFreakingValue

DeepFreakingValue
Manager - Equity Analytics
Manager - Equity Analytics

ANALYSIS: Sri Lanka Car Market 2024 16570010

The Government of Sri Lanka is planning to lift the restriction on importation of motor vehicles shortly which was barred since 2020-23 during Covid 19 Pandemic followed by the economic crisis as a result of the foreign exchange shortage.

Investment Advise to Car Owners
Sri Lankan Rupee (LKR) has depreciated against the Japanese (JPY), India (INR) and Europe (EURO) during last 3 years representing the currencies of the largest exporters of used/new Motor vehicles to Sri Lanka.

- Sell your Japanese Cars (Toyota, Honda etc..) instead of selling the Indian Cars before import restriction is lifted
- Hold on to your European Cars (Mercedez, BMW etc,,) before selling Indian Cars (Maruti, Tata, Nano etc..)
- European cars can be sold for higher profits margin and Return on Investment (ROI) in future.


Analysis of Future Car Prices based on Exchange Rate comparison:

"The government is to lift restrictions of vehicle imports partially allowing the motor traders to bring down small cars with engine capacity of 1000 CC and 1300 CC. This decision will be taken in accordance with a comprehensive policy and guidelines in vehicle imports soon, a senior Finance Ministry official said.

Cost of Japanese Vehicles


ANALYSIS: Sri Lanka Car Market 2024 110

Import cost of Japanese Vehicles likely to go up by more than 39% than previous imported cost due to appreciation of JPY/LKR from 1.60 to 2.23 within last 3 years. This is in addition to any changes in Custom Duty and other levies

Cost of Indian Vehicles

ANALYSIS: Sri Lanka Car Market 2024 210

Import cost of Indian Vehicles are likely to go up by more than 58% than previous imported cost due to appreciation of INR from LKR 2.50 to 3.88 within last 3 years. This is in addition to any changes in Custom Duty and other levies. #SriLanka

Cost of European Vehicles

ANALYSIS: Sri Lanka Car Market 2024 311

Import cost of European Vehicles are likely to go up by more than 77% than previous imported cost due to appreciation of EURO from LKR 199 to 353 within last 3 years. This is in addition to any changes in Custom Duty and other levies.

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soileconomy

Post Mon Jan 08, 2024 6:37 am by soileconomy

Import duty  and additional vat (18%) will impact on newly imported vehicles

avatar

Post Mon Jan 08, 2024 2:08 pm by God Father

ANALYSIS: Sri Lanka Car Market 2024 Scree421

Apart from the 39% increase in the CIF value of Japanese vehicles due to LKR depreciation against JPY, the importation of vehicles would also be liable to higher import taxes due to recent increase of Value Added Taxes (VAT) from 15% to 18%.

TAXATION ON IMPORTATION OF JAPANESE VEHICLES

TAXATION
- 5% to 35% duty will be imposed.
- 25% tax will be levied on motor vehicles.
- 18% VAT will be charged.
- 5% of the CIF value of the vehicle will be charged as Ports and Airport Levy(PAL). In some cases, PAL may be charged at 0-2.5% of the CIF value of the vehicle.
- 1% to 45% of the CIF value will be charged as ad valorem tax,
- 2% of the cumulative of the (CIF value x 110%), cess, customs duty, and PAL will be charged as Nation Building Tax.

CALCULATION OF CUSTOMS DUTIES
For vehicles categorized under HS headings 8702, 8703, 8704,8705, and 8711, the value is calculated on the basis of two cases:

In the case of a brand new vehicle, the calculation is done on the transacted value.
In case other used vehicles, the value will be calculated on no less than 85% of the manufacturer’s value of a similar brand new vehicle. The local taxes will be excluded during the calculation.

Restrictions imposed on the age of vehicles:

Cars: Max. 2 years old
Vans and dual-purpose vehicles: Max. 5 years old
Buses, jeeps, motor cars, ambulances, motorbikes, and all-terrain vehicles: Max. 3 years old
Cabs(single and double), trucks and lorries, and refrigerated trucks: Max. 4 years old

https://unetworld.com/import-regulation/Sri%20Lanka#:~:text=25%25%20tax%20will%20be%20levied,CIF%20value%20of%20the%20vehicle.

IMPORT RESTRICTION
The import ban on vehicles has been in place since 2020, a decision rolled out by the government to prevent the island nation from further losing foreign exchange. The move to relax small vehicle imports comes in the wake of limited revenue collection by Sri Lanka Customs, approximately falling short by Rs.300 billion-Rs.450 billion, on the backdrop of stringent revenue targets set by the International Monetary Fund.

Before the ban on vehicle imports, Sri Lanka had new vehicle registrations of over 350,000 annually. The majority was dominated by motorcycles, with over 280,000 registrations, followed by cars, with over 35,000 new registrations.  New registrations of small car imports of less than 1,000CC amounted to 26,962 in 2019 and 64,195 in 2018.

avatar

Post Mon Jan 08, 2024 5:36 pm by D.G.Dayaratne

Priority has to be given. to settle foreign loans than imports of vehicles for personal use.

Imports of vehicle should be limited to improve public transport system and export production.

Import of vehicles for personal use can be used. as an incentive to earn foreign exchange

For example, to give 5 years import Permit less than 5% of total value foreign exchange earnings. .   

.



Last edited by D.G.Dayaratne on Mon Jan 08, 2024 5:53 pm; edited 1 time in total (Reason for editing : typing error)

DeepFreakingValue

Post Mon Jan 08, 2024 6:25 pm by DeepFreakingValue

Sri Lanka: Total Vehicle Population (2012-2023)

Sri Lanka vehicle population is a good indication to determine how country has used its foreign reserves to import vehicles for passenger transport and utility purposes instead of industrial or agricultural usage.

ANALYSIS: Sri Lanka Car Market 2024 Scree188

ANALYSIS: Sri Lanka Car Market 2024 Scree190

Sri Lanka: Total Vehicle Population as at September 2023  

ANALYSIS: Sri Lanka Car Market 2024 Scree191

ANALYSIS: Sri Lanka Car Market 2024 Scree192

Source: Department of Motor Traffic
https://dmt.gov.lk/images/2023/total_population/Vehicle_Population_2010-2023.pdf

Sri Lanka New Car Registration during last 25 Years

ANALYSIS: Sri Lanka Car Market 2024 Scree422

Car Registrations in Sri Lanka decreased to 108 Units in November from 129 Units in October of 2023. Car Registrations in Sri Lanka averaged 2191.31 Units from 1997 until 2023, reaching an all time high of 15017.00 Units in September of 2015 and a record low of 41.00 Units in November of 2022. source: Central Bank of Sri Lanka

avatar

Post Mon Jan 08, 2024 7:47 pm by D.G.Dayaratne

It is very important to give priority to impot motorcycles. also, as public Trasport is. very week.

avatar

Post Sun Feb 18, 2024 11:06 pm by ChooBoy

Exchange Rate is falling. why not government allowing Vehicle Imports?

avatar

Post Mon Feb 19, 2024 11:14 am by D.G.Dayaratne

Govt will allow electrical car impots before the election..

avatar

Post Wed Oct 16, 2024 1:30 pm by God Father

Why Sri Lanka Should Continue Vehicle Import Ban?

Unnecessary Stress on Foreign Reserves
Sri Lanka spent over $800 million annually on vehicle imports before the ban. Continuing the ban reduces this substantial drain on foreign reserves, allowing the country to manage its fragile forex situation.

Current Vehicle Population
 As of 2023, the vehicle population is over 7.5 million, with adequate private and public vehicles to meet demand, mitigating the need for new imports.

Trade Deficit from Unnecessary Imports
 Pre-ban, vehicle imports significantly contributed to Sri Lanka's trade deficit, making up 15% of total imports in 2019. Avoiding such high expenditures is essential for economic stabilization.

Exchange Rate Pressure
 Vehicle imports increase the demand for foreign currencies like the U.S. dollar. Sri Lanka's Rupee, having depreciated over 80% during the 2022 crisis, cannot withstand further pressure. Continued restrictions on imports help to maintain the fragile exchange rate stability achieved so far.

Economic Recovery
 By cutting non-essential imports like vehicles, Sri Lanka can focus its limited foreign reserves on critical sectors—such as energy and essential goods—key to the country's economic recovery. The vehicle import ban has helped reduce imports by 20% in the first half of 2023, making it a necessary measure for continued fiscal discipline.

Maintaining the vehicle import ban offers a crucial buffer to ensure foreign reserves are preserved, the trade deficit remains in check, and economic recovery efforts are sustainable over the long term.

soileconomy likes this post

avatar

Post Wed Oct 16, 2024 5:00 pm by Biggy

Yes. Import ban to continue but availability of spare parts a must .

God Father likes this post

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Post Wed Oct 16, 2024 9:09 pm by empire

that's a selfish view. the vehicle market mafia should be dealt with by importing vehicles in quotas

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D.G.Dayaratne dislikes this post

avatar

Post Wed Oct 16, 2024 9:15 pm by Biggy

Why? The Government can offer spares at a much cheaper price while saving lots of USD on importing cars + impliment quality controls on Garages. We never actually retire cars here unlike in developed countries and so cars just keep adding up. Open to correction Smile

Rich Guy

Post Thu Oct 17, 2024 1:31 pm by Rich Guy

using decade-old vehicles is not good for the environment and for the owner as well due to higher maintenance, part costs, higher fuel costs, etc. Therefore, using old vehicles is not an option to safeguard dollar reserves. give proper support to export companies to get more dollars is a good option  Very Happy

avatar

Post Sat Oct 19, 2024 10:15 am by Rare

https://www.rieti.go.jp/en/special/p_a_w/040.html
 
So Many Cars, So Few Roads: A problem for cities everywhere in the world

soileconomy

Post Sun Oct 20, 2024 4:20 pm by soileconomy

Due to influence from India there is rule that 2 year old cars could be imported .
That policy is adopted by sri lankan authorities to make a car market for low ,inferior quality Indian products.
Most of the people know a ten older japanese car is much more durable and worth than today made Indian cars.
Should allow japanese made cars to be imported upto 10 years old.
Any government should discourage importing of low quality Indian products .
Japanese cars are
More durable 
Have a good safety standards 
Minimum maintenance cost
And many more advantages than low quality Indian cars

avatar

Post Sun Oct 20, 2024 9:50 pm by D.G.Dayaratne

ONLY FORIGN EXCHANE ERNERS SHOLD BE ALLOWED TO IMPORT CARS. (10% OF NET FORIGN EARNININGS FOR A YEAR)

avatar

Post Sat Nov 09, 2024 12:11 am by OC.S

Japanese will force Govt to open the market once this rating upgrade thing is done.

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