President Anura Kumara Dissanayake addressing Parliament recently laid to rest all speculation regarding the import of vehicles for personal use. He said that the import of private passenger vehicles (mainly cars, vans and SUVs) will be permitted from February 1, 2025, subject to certain terms and conditions.
This is heartening news from the point of view of thousands who are waiting to buy a new car, given that imports have been banned for almost five years. The ban took effect with the onset of the Covid-19 pandemic and continued through the economic meltdown of 2022. Although the country’s foreign reserves have climbed steadily since then, the authorities somewhat prudently kept a tight leash on car imports, which is generally a drain on foreign exchange to the tune of US$ 1.5 billion per year.
However, the economy has now improved to the point where this can be offset through expat remittances, tourism and export income. Hence, the decision to allow the importation of cars, which was incidentally, the only category that still remained banned. Every other item, from oranges to TVs can now be imported freely. Commercial and agricultural vehicles are already permitted to be imported.
While the categories of private vehicles that will be allowed are still not clear, we hope that preference will be given to New Energy Vehicles (NEVs) or Battery Electric Vehicles (BEVs). Hundreds of brand new BEVs are already on our roads, thanks to a dubious electric vehicle permit scheme introduced by the former regime, but this has nevertheless given an inkling of the benefits of having BEVs which can reduce our dependence on imported fossil fuel. Almost every manufacturer now has a BEV line and the premium over the equivalent Internal Combustion Engine (ICE) version is reducing day by day. Of course, in a “chicken and egg” situation, the demand for BEVs will increase if there are more chargers and vice versa. Solar chargers should be encouraged as the idea of having more BEVs will be negated if they are all charged through the national grid, which is driven mostly by thermal power. In the end, it will be just as bad as running them on fossil fuels.
It is also advisable to limit the upper engine capacity of pure petrol or hybrid vehicles to 2.0 litres and diesel models to 3.0 litres, lest buyers import high-capacity gas guzzling vehicles that will add a further burden to our fuel bill. Today’s 1.0 litre and 1.5 litre ICE cars are powerful enough for most everyday purposes.
The Government has also taken another commendable decision with regard to the registration of cars. According to this decision, importers have to register the cars in the name of the customers within 90 days of importation. This will mostly affect the “car sales” that import hundreds of vehicles at once and keep them in forecourts for months, if not years, looking for customers. On the other hand, accredited sole agents of car manufacturers import cars only on order. Thus this measure is designed to prevent the unnecessary outflow of foreign exchange.
The Government must also ensure the interests of the local vehicle assembly industry when permitting the import of Completely Built Units (CBUs). The former imports only certain parts of the vehicle in Completely Knocked Down(CKD) form and then builds the car with local value addition such as seats and tyres. The duty structure applicable to locally assembled vehicles should not change, to give them a slight advantage over the CBUs. At the same time, the assemblers should offer a quality product that compares well with the fully imported CBUs. The industry should strive to move beyond the assembly phase and enter the manufacturing phase, where the entire car is manufactured locally.
There is also a pressing need for a more rational duty structure for private cars, which are very heavily taxed now. A Sedan car that costs just Japanese Yen 2 million (Rs.3.7 million) is more than Rs.10 million here, which is patently absurd. Very high automobile taxes can only be justified if we have an excellent public transport system, as seen in Japan and Singapore.
Until we reach that level, people will always aspire to buy a car. Besides, very high taxes discourage buyers from purchasing brand new cars and they will instead opt for so-called reconditioned cars which require more maintenance and more spare parts. In the end, the country loses even more foreign exchange and revenue targets also go haywire. It would indeed be prudent to ban the import of reconditioned cars altogether.
On the other hand, a brand new car can be used with minimal maintenance for at least five years. As a first step, the Government should consider offering duty and tax rebates for BEVs (this is done in most countries), which can save millions of litres of petrol/diesel per year and hence reduce our fuel bill in the long run.
The authorities can also offer a duty and tax concession for taxi companies and ride sharing/hailing services to import at least 100 BEVs each. The expansion of such services would discourage at least some of those planning to buy a new car of any type. Depending on ride-hailing services takes so many factors out of the equation including fuel, maintenance, repairs and parking. All you do is hail one from an app, ride and pay the driver. Not having to deal with parking alone reduces one’s stress level. The next wave of ride-hailing cars could even be driverless – it will virtually be a private car and you will no longer need to buy a separate car to travel in private, thus negating the urge to buy a new vehicle in the first place.
How to reach us
If you would like to comment on the articles that appear in our editorial/opinion and features pages, please write to us at: editor.suo@lakehouse.
If you have a news item to share with us, please send to: [email protected]
If you wish to write a Letter to the Editor, a tribute, an opinion piece, feature article, a correction or a Right of Reply (RoR) under the guidelines of the Press Complaints Commission of Sri Lanka (PCCSL), you can forward them to: [email protected]
