The Government is set to partially relax the vehicle import ban that has been in place since 2020, says First Capital Research.
“With this move, the government is planning to lift restrictions placed on small cars with engine capacity of 1,000CC and 1,300CC.”
The move to relax small vehicle imports come in the wake of limited revenue collection by Sri Lanka customs (approximately falling short by RS. 300.0 bn – RS. 450.0 bn), on the backdrop of stringent revenue targets set by the IMF.
“Prior to the ban on vehicle imports, Sri Lanka had new vehicle registrations of over 350,000 annually, of which majority was dominated by motorcycles ( over 280,000) whilst Cars came in second with over35,000 new registrations annually,” First Capital Research stated.
Considering the pent-up demand in the system on the back of outstanding permits given to government officers, we believe that the lifting of the ban on small vehicles under 1,300CC will trigger new registrations between 10,000-15,000 in the next 2 years (new registrations of small car imports less than 1,000CC amounted to 26,962 in 2019 and 64,195 in 2018).
This move is expected to boost the prospects for Diversified Financials given that 57.3% of the loan book in the sector is exposed to the leasing business.
Taming down in interest rates together with the pickup in economic activity in the country is also expected to aid leasing volumes, after Govt. partially relaxes the prevailing import ban.
“However, steep depreciation of RS. and recently implemented taxes are expected to cause headwinds to the expected growth in volumes,” the report added.
