This is an exciting time for car buyers and car lovers alike, as the first shipments of private passenger cars are arriving at Colombo and Hambantota Ports.
Most of the cars arriving in Colombo come in containers, while at Hambantota, the cars usually arrive in Roll On Roll Off (RORO) vessels, where the cars are stocked on decks of the ship without using containers. Since this is the first time in five years that private cars are coming in, there is a lot of excitement in the air and some YouTubers are even uploading “unboxing” videos of cars coming off containers.
This is also the first time after five years that private buyers can purchase electric cars outside of a permit scheme. We have always been against permit schemes, because they create an imbalance in the market and almost always lead to fraud. An open market is a much better alternative, as long as the tax structure is not overbearing.
We are yet to analyse the tax structure on private cars comprehensively, but from the available data it seems that electric cars too are very heavily taxed, bucking a trend seen in most other countries that grant tax and duty incentives for buying Battery Electric Vehicles (BEVs) or New Energy Vehicles (NEVs). This may have the effect of discouraging buyers from choosing an electric car over a fossil fuel powered car.
Remember, our fuel import bill hovers around US$ 6 billion per year. If we have one less car sipping fuel, that in itself provides some relief vis-à-vis the fuel bill. Multiply it by 5,000 cars initially and you get a clearer picture of the fuel savings.
Now that many importers and sole agents have published their brand new car prices, a better picture has emerged for consumers wishing to purchase a new motor – Internal Combustion Engine (ICE), Hybrid or BEV. Buyers have noted some interesting facts regarding these prices.
For example, a mid-range executive saloon from a well-known German luxury marque costs Rs.61 million for the petrol version, Rs.67 million for the hybrid and a whopping Rs.82 million for the BEV version. In other words, the BEV costs Rs.21 million extra, a very big sum by any stretch of the imagination. Granted, there is a price premium for the BEV, but whether it should translate to Rs.21 million is the question.
The base price (base spec, not the fully kitted car) in the US for this particular BEV is US$ 67,000, which is roughly equivalent to Rs.20 million before any taxes and duties. Based on this figure alone, a buyer of this car in Sri Lanka is paying around at least Rs.50 million in taxes and duties, which seems to be excessive to say the least. Moreover, in most other countries the equivalent ICE car (base model) actually costs more – around US$ 71,000, which translates to around Rs.21 million before taxes and duties. This is an almost negligible difference on the face of it.
We have to look at this discrepancy from another angle. Since there is little or no incentive here to go for the electric model of the same car, buyers are naturally going to calculate just one statistic. How much 95 Octane fuel can I pump for Rs.21 million? With that kind of money, the buyer of the ICE car can pump a staggering 5,660 litres of 95 Octane fuel at the current prices (this may vary in the future).
Supposing this car has a 68 litre fuel tank, that translates into 83 “full tanks”. If the car does at least 10 Km/litre (generally more in outstation runs), the car can travel around 60,000 Km (give or take) which amounts to three years of general use. The BEV owner, in addition to paying Rs.21 million extra upfront, also has to pay for charging during those three years. At least in this case, it looks as if the ICE buyer has a better proposition. After all, who does not like to save Rs.21 million? In any case, you feel the pain at the pump only marginally.
The authorities should undertake a review of the taxes and duties on BEVs (and even ICE cars) as soon as economic conditions allow. Otherwise, people will still buy an ICE car even if a comparable BEV is available from the same manufacturer. People like to save money upfront, not in the long term. The Government has indicated that it is open to changing the tax and duty structure as time goes on, so there is still hope for those who want to opt for a BEV over an ICE car. Another factor is that ex-factory electric car prices could tumble down in the next few years as economies of scale and cheaper, better battery technologies kick in. Thus, the prices in Sri Lanka too could decrease even if the duties and taxes remain at the current level.
We need more electric cars on the road and a charger network to go with it. All the new fossil fuel stations that are coming up in various parts of the country must be required to have at least one DC supercharger on their premises for the convenience of BEV owners. The Government should slash duties and taxes on Level 2 and above chargers and also encourage the installation of solar chargers to reduce the dependency on the national grid. A holistic approach should be evolved towards BEVs.
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