"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."