The motor vehicle industry has been plunged further taking the second hit after the devastating Easter attacks, from the current deadly virus that has dropped sales by around 80 percent since its outbreak early this year, motor industry officials said.
The depreciation of the local currency against the Greenback and the sharp decline in the income of the people under the current situation in the country and elsewhere in the world are worsening the conditions for the industry.
“We are unable to sustain operations any longer as sales have plummeted so that if the current situation persists we would have to shut down business at least for a short time,” said a leading vehicle importer in Colombo.
The motor industry with the rest of the industries recorded low sales with the economy slowing down here and abroad. The exorbitantly high taxes on vehicle imports have been a major hindrance for the growth of the industry. Sri Lanka’s vehicle import duties have been over 200 percent making the purchase of even a small car unaffordable to many in the country.
The former government at its last budget raised the duty structure for many categories of vehicles further aggravating the situation for the industry.
“We appreciate the relief package launched by the Government to help affected industries and the SME sector entrepreneurs. However we would much appreciate if the President could order banks and financial institutions to grant the relief immediately as vehicle importers are in a dire strait saddled with the payment of loans and low sales,’ Vehicle Importers Association of Lanka President Indika Meerenchige said.
He said the move to grant a six month grace period for the payment of loans and slashing the interest on initial capital payment to four percent is a sound decision. But it would not have an impact if it remains as a proposal and not implemented.
The situation in sourcing China and other regional countries too have affected the flow of commodities including vehicles, to Sri Lanka.
The high Loan to Value ratio (LTV) which is currently at 50 percent has also burdened the average income earner.
Ideal Group Founder and Chairman Nalin Welgama said “the corona pandemic is having an adverse impact on our overall economy. Banks and licensed Finance Companies will find that customers will struggle to meet their monthly repayments due to the contraction in economic activity. This would result in financial institutions focusing on collections rather than advancing new loans. Our car segment has an LTV of 50per cent. This makes it even more difficult for customers to afford vehicles particularly at this time. The SL rupee has depreciated from 182 to the US dollar 186/50, at present. This I feel is largely due to foreigners exiting our Bond market and repatriating foreign currency at higher rates. This is also witnessed in India, with their currency taking a battering from Rs 70 to Rs 74/50 against the Greenback. Naturally, the prices of vehicles are set to rise dramatically due to currency depreciation. Hence the vehicle market is headed for a further downward trend despite a lowering of our interest rates recently.