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Mon, 27 April 2015 04:25:31
Sri Lanka motor sales down
04 Mar, 2009 06:36:27
March 04, 2009 (LBO) – Sri Lanka's once prosperous motor industry has seen a sharp fall in sales, hit by shrinking credit, a fast depreciating rupee and import restrictions, a senior official of the Ceylon Motor Traders Association (CMTA) said.

"The import duty on some of these midsize cars is close to 300 percent of the Cost, Insurance, Freight (CIF)," said Senake Amarasinghe, Chairman of CMTA. "That is regarded as the most expensive in the region."

The position got aggravated by a 200 percent margin on passenger car Letter of Credit (LC) imposed by the Central Bank, which came into affect in January, he said.

"That had a further impact on vehicle imports."

United Motors Limited (UML), sole agents for Mitsubishi Motor Corporation (MMC) of Japan and Perodua of Malaysia, said profits for the December quarter were down 99.6 percent or by 161 million rupees, to 623,000.

In the December quarter UML had only sold 12 sedan cars of its highly popular Lancer model. And it sold only 24 Mitsubishi Monteros, a Sports Utility Vehicle (SUV) which is a favorite amongst politicians and businessman.

During the period UML had sold 15 MMC L300 vans, 26 L200 double cabs and 61 single cabs due to the relatively lower tariffs on them.

UML during the December quarter had sold 124 Perodua vehicles.

Revenues for the December quarter had plummeted by 17 percent or 384 million rupees, to 1.8 billion.

"With the corporate sector slowing down, the future for investments in cars is definitely expected to slow down," said Thakshila Hulangamuwa, vice president, business development, Asha Phillip Securities.

"The rate hike by the leasing companies along with the high inflation has hampered car sales and it has basically pushed the new buyers to hold on or postpone car purchases."

In addition to this UML had suffered from the decline of government car permits that had flooded the market in the first half of 2008. Car permits were issued as part of a reward scheme for government servants such as doctors and teachers.

"Last year there were about 12 -15,000 doctor car permits in the country. These permits allowed the import of cars that had engines up to 1600 cubic capacity," said Amarasinghe.

"This helped sales in some of the brand new car companies."

At the end of the first nine months UML profits had skidded by 74 percent or 200 million rupees, to 67.9 million.

Turnover for the nine months had slipped by 2.7 percent to 5.56 billion.

Diesel and Motor Engineering Company (DIMO), the sole agents of German luxury car manufacture Mercedes-Benz, Chrysler Motors of America and TATA Motors of India, had also a dismal December quarter.

The firm made a 17.9 million rupee loss, as against the 30.3 million profits made during the same period in 2007.

In the December quarter DIMO had sold just three Mercedes-Benz vehicles and 10 Chrysler vehicles.

"The big buyers of cars - the corporate clients - are staying away from the brand new car market," said Hulangamuwa.

"It is not only luxury brand Mercedes that’s feeling the economic pinch. Bavarian Motor Works (BMW), Peugeot, Jaguar, Porsche and Audi have also had a dismal quarter."

DIMO’s group turnover for the December quarter had declined by 33 percent to 2.43 billion.

Car sales for the first nine months had declined by 33.2 percent or 1.9 billion rupees, to 3.7 billion rupees, said DIMO.

Group turnover for the first nine months had decreased by 31 percent to 7.2 billion rupee.

“Luxury car sales apart from a few government orders will be literally non-existent in the short to medium term," said Hulangamuwa.

"If the present situation continues the second hand cars might flood the market, cutting the demand for brand new cars further."

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6. Sujeeva Mar 04
The key reason for todays lower sales is in 2007/2008 all car dealers imported approx 15,000 new cars on permits which is the requirement of the country for 5 years.

Once recession hits atop its obvious the todays consequences though some importers not predicted. About resale values some used cars appreciate mainly due to hike of new car prices upon exchange & new tax only. Also the appreciation depends on cheaper secondhand parts availability & lower engine capacity below 1.5etc, the key requirement of used car buyers.

5. lakshman Dalpadado Mar 04
Nicole, I hope you are not in business!! The apparent increase in car price is because the LKR has depreciated 120% over the last 10 years.

According to my calculation, If you had 1.2 million in a bond or deposit account with an average interest of 12% ( very conservative) for twelve years you should end up with more than five million rupees!! and thats without the expenses of maintaining a car .

For a business user a vehicle maybe an asset, but for the vast majority of buyers a car is a depreciating asset and a big liability.

4. pp Mar 04
Car market is here rather funny. You get crappy models for fancy prices and some very hardy cars selling for peanuts. I think car sales people are somewhat responsible for these price disparities in the secondary market.
3. Nicole Phillips Mar 04
Considering the cost of aquiring a car these days it could be considered an investment... :-D
of course i disagree with your statement that only .5% of cars appreciate in value after being driven out of the showroom...

the sri lankan used car market is a strange one where we actually see value holding or appreciation in strict rupee values over time.... a vehicle bought brand new 12 years ago for 1.2mil is commanding a price of 2.5mil today.

I tried to buy back a vehicle i sold 5 years ago for which i offered double the price i sold it for and was turned down... (the guy who bought it wanted three times the value at which i sold it)

most of the japanese vehicles have retained their value or appreciated slightly over the past few years as opposed to the european vehicles which see appreciation or value holding for certain models and downright depreciation of others...

2. Thakshila Mar 04
Mr. Dalpadado, appreciate your comment also please note that
In business, the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business.

Thakshila Hulangamuwa.

1. lakshman Dalpadado Mar 04
"With the corporate sector slowing down, the future for investments in cars is definitely expected to slow down," said Thakshila Hulangamuwa, vice president, business development, Asha Phillip Securities"

Thakshila Hulangamuwa - An' investment must' have a fair chance of appreciating in value or generate a decent income. Overwhelming majority of cars depreciate the moment it is driven out of the show room and only about .05% cars appreciate in value- so when did it become an instrument for investment ??

Perhaps only for the privileged few who can permits to get cars tax free?