MOTOR MARKET
Compiled by Rohan Morais
RACING INTO THE FUTURE
Julian Reuter is driven by new developments in the motor industry
Q: What is your assessment of the motor market in Sri Lanka?
A: Industry growth over the last 10 years has witnessed healthy competition amongst all companies. This has led to consumers having an array of choices in all segments.
The automobile market has sharpened its focus on customer satisfaction; and therefore, the quality of the service will continue to remain high. In general, the industry clearly displays an upward trend in this regard.
Q: How do you view the high taxes and duties imposed on vehicle imports to Sri Lanka – is this acceptable in an economy targeting rapid growth?
A: Although Sri Lanka might be targeting rapid economic growth, the infrastructure needs to be in place to facilitate this.
High taxes that increase every year are employed not only to control traffic on our roads but also to reinvest on improving the quality of the road network to accommodate the arrival of more vehicles. Nevertheless, import taxes in Sri Lanka are definitely higher than in most other countries.
Q: Could you recommend any policy amendments to improve the motor industry as a whole?
A: The introduction of higher import duties on electric cars coming in should be considered counterproductive as most countries in Europe and other parts of the world offer tax incentives for their purchase.
Secondly, a deeper analysis of the grey market for cars is required. Such cars are not manufactured specifically for use in tropical climates such as ours so their deterioration would begin within a short period. Most customers are not aware that such vehicles are not covered by global warranties.
Leasing facilities offered by financial institutions have also changed drastically and now require customers to pay much more – as high as between 25 and 50 percent – to purchase a vehicle. The impact of this decision on the vehicle market could only be analysed in the future.
Q: Could you compare the demand for luxury vehicles in Sri Lanka with other countries in the region?
A: The demand for luxury vehicles has declined drastically due to restrictions on import permits. Moreover, we need to consider that Sri Lanka has the highest percentage of import duty for vehicles in the region. So as a percentage, the number of units sold is falling.
Q: In your view, what are the main challenges faced by the motor industry and how could they be tackled?
A: One major challenge is the difficulty of formulating long-term plans as the automobile market in Sri Lanka is extremely volatile.
Generally, the annual budget brings about changes in the duty structure for vehicle imports without prior indications or information being passed onto franchises.
Such constant uncertainty affects purchase patterns across the country. Another major drawback is the lack of infrastructure to accommodate the number of vehicles plying the roads.
Q: What is the global future of hybrid and electric cars? Is enough being done to reduce our dependence on oil?
A: The future of hybrid and electric vehicles is extremely interesting. Hyundai has developed a highly advanced model (Ioniq) that would be introduced as a hybrid, plug-in hybrid or fully electric model. Such models would be introduced to the Sri Lankan market in the near future.
Despite millions of dollars being spent by companies every year on research and development, not all global customers are fully aware of the benefits of such vehicles. People are more inclined to purchase petrol or diesel vehicles as they’ve been in use for a long time and customers are apprehensive about adapting to modern technology.
Many countries offer tax benefits to increase sales of hybrid and electric vehicles. Since Sri Lanka has sunny weather during most parts of the year, electric cars could be charged with solar energy and our oil imports could be reduced substantially.
Q: Where do you see Sri Lanka’s motor industry 10 years from now – and do you think it will succeed in adapting to the constantly changing business landscape?
A: It is difficult to predict the status of the automobile market even in the next two years especially given the volatility in this industry.
However, the industry will continue to adapt to the constantly changing business environment as owning a vehicle is regarded as a high priority for most people, which is amply reflected by the growth in vehicle registrations in this country.
Through amendments to import regulations, we will most likely witness the trend shifting towards the purchase and use of more hybrid and electric vehicles.
