Vehicle importers now want to export
By Madhusha Thavapalakumar
Vehicle importers, who have been effectively driven out of business due to the Government’s vehicle import ban, are requesting for opportunities to join the export sector to ensure their survival.
The Vehicle Importers Association of Sri Lanka (VIASL) has urged the Government to implement a stable long-term policy that would convert their now virtually redundant businesses into export-oriented businesses in similar industries.
Amidst strict restrictions on vehicle imports by the Government to prevent a possible foreign exchange crisis, the industry has made such a request to ensure that vehicle importers do not go bankrupt and subsequently close down their businesses due to the ban on vehicle imports.
On 22 May, Minister of Finance, Prime Minister Mahinda Rajapaksa issued a Gazette notification banning vehicle imports into Sri Lanka until further notice, while other import restrictions are imposed only for a period of three months. This has left vehicle importers in the industry with no choice but to survive only on the stocks they have at the moment.
VIASL President Indika Sampath Merenchige told The Sunday Morning Business that local vehicle importers have strong ties with international vehicle dealers and auto part manufacturers, which could be leveraged to establish export businesses in Sri Lanka.
“These export businesses could include vehicle components and spare part manufacturing. We could even discuss with global companies and commission their plants here in Sri Lanka; if our Government implements long-term policies to do so, we will invest in these businesses,” Merenchige noted.
He added that such a policy would immensely help about 50,000 workers who are directly and indirectly employed by the industry as they would be shifted into these new businesses.
According to Merenchige, Sri Lanka has about 500 vehicle importers who import vehicles as their main profession, and about 25-30 of them are large-scale vehicle importers who have been in the businesses for decades. For them, moving on would be easier as they can recover the money once their stock is sold when they are mostly left with no debt.
“Once our stocks are sold, our business will have to shut down. Apart from the large-scale vehicle importers, others will face severe financial issues. Most of these importers have obtained loans and developed their businesses. Some of them are depending 100% on loans,” Merenchige noted.
Accordingly, loans obtained by vehicle importers are believed to be 75% higher in value than their stocks and therefore once the stocks are sold, importers might not have any turnover to settle their loans.
This situation is expected to get worse even further, noted Merenchige, as the panic that has been created by the recent closure of The Finance Company (TFC) has led to people withdrawing their deposits from finance and leasing companies, and investing it in assets like vehicles and property.
“With this trend, our stocks will finish sooner than we expect. People have already begun to purchase vehicles with the full money being settled. This will put us in more trouble,” Merenchige added.
Sri Lanka’s vehicle industry is one of the main industries that contributes significantly to national tax revenue. Nevertheless, the industry is financially suffering since the Easter Sunday incidents and as a result, vehicle importers had to sell vehicles at lower prices. In addition, in November 2019, a luxury tax came into effect and cars were subjected to a price increase of Rs. 75,000-100,000, which was again a blow to the industry. This blow has been made more severe with the local outbreak of Covid-19.
To avoid a possible foreign exchange crisis due to the economic hit caused by Covid-19, the Sri Lankan Government restricted imports since mid-March, providing exceptions only for raw materials, pharmaceuticals, and oil. The restrictions will be in place until 15 July.