Sri Lanka Volkswagen deal needs transparency: Motor Traders’ Chief


Aug 31, 2015 (LBO) – The assembly plant investment by the German automaker Volkswagen in Sri Lanka needs to be transparent and all other motor companies who wish to invest should get the same facilities, an official of the Ceylon Motor Traders’ Association said.

“I think they have to be very transparent in the Volkswagen deal,” Gihan Pilapitiya, the chairman of association, told Lanka Business Online, referring to the government.

“It looks very shaky. What we have already requested the government is to float it. If they are giving Volkswagen why not give Toyota, why not give Nissan and other people,” he said.

“There may be many car companies who would look at it. We have already written to them but as usual there was no response from the government. But probably because of the changes,” he said.

A week before the general election in August, the sole agent of Volkswagen, Senok Automobile, signed an agreement with Sri Lanka’s Board of Investment to have an assembly plant in the island with an investment of 26.5 million dollars.

According to BOI, the car maker initially plans to make cars for the local market. It will get an eight year tax holiday for their investment and receive 30 acres of land, in Kuliyapitiya, the North Central Province.

The facility will be completed within a period of two years and the plant will assemble passenger cars, sport utility vehicles SUVs, multi utility vehicles MUVs and commercial vehicles.

Pilapitiya, the re-elected chairman this week, says good governance policies and facilities should apply to everyone who is interested to make the same kind of investment in the motor industry.

“I think they have to publish it and be transparent and say this is the policy and you entitled for it, if you bring this much of investment, give this much of new employment and export this new number of car,”

“Otherwise it is going to be a huge issue. I don’t know whether it was an election bomb,” Pilapitiya told.

“I heard the investment is around 30 million dollars. If you come to my company, the value of the stock is more than that. 30 million dollars is nothing.”

The German company which this year overtook Toyota as the world’s largest carmaker by sales will assemble diesel-powered vehicles in the 1,000cc to 2,000 cc category in Sri Lanka.

The company said these vehicles would be marketed locally for a period of three years and thereafter the vehicles will be exported to overseas markets. They plan to employ about 200 people initially to produce 500 vehicles annually.

Pilapitiya says there can be serious issues coming up when it comes to marketing theses cares globally as Sri Lanka is not a popular destination for an automaker.

“Frankly, I do not think it will be viable and even if they export, I don’t think anyone wants to buy a car assembled in Sri Lanka,” Pilapitiya told Lanka Business Online.

“There are classic examples in our market. There are top-end vehicles sold that are Indian made. None of those vehicles could be sold in Sri Lanka. You can ask Mercedes. They were trying to sell Indian-made Mercedes in Sri Lanka. They would have sold only five units. It was never picked up by the Sri Lankan market,” he said.

“In here people are curious about country of manufacture, country of assembly etc. You can’t just sell. I don’t know who will buy a car made in Sri Lanka, may be Pakistan will buy.”

Pilapitiya added that even the cost of assembly of a car is higher in Sri Lanka.

“Volkswagen is not a small company, they are among the first five automobile companies in the world. I don’t think they would be flexible enough to give 500 vehicles to Sri Lanka to assemble, the cost might be more,” he said.

“I know, because we have tried to get a vehicle to assemble here, and the cost is 20 percent more.”

“This is not a nut and bolt business. These are not manually assembled, but by robots. That process is very cheap. It’s cost effective and you don’t need lot of manpower. So if you take it apart and give, the cost will be very high.”

“China will do anything. But Germans and Japanese will not compromise anything for quality,” Pilapitiya said.