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By 2017-11-20

By Rathindra Kuruwita

For a significant number of Sri Lankans the most important budget proposals are those governing the prices of motor vehicles. Ceylon Today met with Ranjan Peiris, the President of the Vehicle Importers Association of Sri Lanka (VIASL) to discuss how the Budget will affect the vehicle market.

First of all tell us your opinion on the impact of the Budget on motor vehicles?

A: There were many positives in the Budget. We are very thankful to the Minister and his team for bringing in this new simple way of calculating duty, which is applicable to all of us, for franchise dealers as well as other dealers. Earlier it was not that, there were two different systems to calculate duties for the two categories.

The Budget brought good news to people who had wanted to buy a small car, i.e. below 1000 CC, as the duty on these vehicles, have come down aCCording to the new duty structure. And as expected the taxes on the luxury category have gone up tremendously.

However, we were surprised to see the Government has increased duty on the hybrid category up to 1500 CC. Many of us and the general public feel that it should have been the other way around or they should have left it as it is. In fact, we have made a request to reconsider this increase and urged the Government to keep the duty on these vehicles to what it was before the increase.

The 1500 CC category hybrid vehicles are being used by those who rent or hire their cars, use them as airport taxis or in the tourism industry. So in a way, this 1500 CC hybrid category propels a lot of industries, not the small car or the luxury car. There are many economical cars in this category, there are about 12 cars for example Toyota Axio gives you about 23 kilometres per litre, and so most of these tourist drivers use Axios. On the other hand, a car like the Toyota Aqua, Honda Fit, Grace and Vezel are used by families, so all these cars are very common on the road. These vehicles are also used by junior executives in the corporate sector because this category was affordable and economical. So, we believe that the Government will take our request seriously and do something reasonable.

There was a lot of allusion to a green economy in the budget and for that we must encourage people to usehybrid and electric cars. However, that won't happen if the prices are too high.

So, we think that the Government must leave the 1500 CC category as it is, we are not asking for a reduction of duty, but just for it not to be changed. I think the Government will definitely consider this and I think that overall it's a good Budget, especially thinking about people who want to upgrade from a motorcycle to a new car and for them it is a good opportunity.

The Government also brought in some minimum safety standards. Not only do vehicles that will be imported need to have two airbags and the anti-lock braking system (ABS) but also they need to adhere to Euro 4 emission standards. Are you happy with this move?

A: Indeed, we welcome the decision to introduce some safety standards and this was one of the proposals we submitted to the ministry. We asked for two airbags and the anti-lock braking system (ABS) and those came through in the Budget. These have to be made compulsory because so many aCCidents happen and people lose their lives due to the lack of safety features in the vehicles.

There are so many cars, I don't like to mention where they come from, without these safety features. In the motor industry safety features like two airbags and the anti-lock braking system (ABS) are now very common. The Japanese domestic vehicles we import are with much more safety options than two airbags and the anti-lock braking system (ABS). Even if we look at a vehicle like Suzuki Wagon R that comes from Japan, the car has the radar brake system as well. If the vehicle you drive has the radar brake system, if the car that is travelling ahead of you applies the brakes your car automatically stops. That's a very valuable safety system as it automatically maintains distance and you would have seen that most of our drivers don't do that, which leads to many aCCidents. Our request is not to have radar based safety features, although we would like that, our request was to, at least to have two airbags and the anti-lock braking system (ABS). So, we were happy to see the Minister making these two features compulsory because this will greatly benefit the people.

We also requested the Government to at least have Euro 4 emission standards and the budget prohibited the importation of Motor Vehicles below the Emission Standard of the Euro 4 or its equivalent from 1 January 2018, in line with the Health and Environmental safeguard measures. The current European standard is Euro 6 but it was really good to see the Government making Euro 4 standard compulsory. We again thank the Minister for taking these two requests seriously.

There was a lot of talk on promoting electric cars in the Budget. The Minister has also given a tax concession of one million rupees and has decided to encourage electric car charging stations. Do you think this is enough or does the Government need to do more?

A: Electric cars should come into the market and I think the Government also wants that. The Minister said that they will build charging stations and provide incentives to encourage the use of off-grid solar power in establishing electric car charging stations.

Those are good ideas because you need such stations at least get to Kegalle from Colombo and return. But then again having charging stations alone would not do. We should also encourage people to buy these cars.

For that reason, we must bring down the duty; they have given a concession of one million rupees duty on electric cars. Earlier, it was only for brand new cars, but now they have extended it to include cars used for a year, however, a car used for one year too is still very costly. The Government allows the import of cars that have been used for three years, and I think extending the concessions on cars used up to three years must be considered by the Government.

If the idea is to have electric cars and hybrid cars on the road, we must price these cars reasonably, otherwise people won't buy as there are other options available, including small petrol cars. So, if the idea is to have more and more hybrid and electric cars, the Government must do something to reduce the duty. We can only regulate the prices using the duty structure, we expect the Government to consider this as well.

The tax concession for electric cars is only valid for vehicles with motors between 70-80 KWs. However, the new models of Nissan Leaf, which is the most popular electric car in the country now has a motor capacity of 100 KWs. Does this mean that the Government has not kept in touch with the latest developments?

A: Among the electric cars Nissan Leaf is the most popular vehicle and while there are so many high-end electric cars which are expensive. So again we have to go to the Ministry and get that corrected, as the Nissan Leaf which is going to be launched in January is at a higher motor capacity and one can travel longer distances.

If this concession does not come within that limit there will be issues, I think we need to talk to the Ministry officials about the coming models and their capacities, so that, everyone can get a better idea of what the situation is.

Main idea behind this is that the vehicles must go into the markets. If people do not agree with the price then there is no point.

When they increased taxes up to 50 per cent, the Nissan Leaf that we were selling at around Rs 3 million went up to Rs 4.7 million and no one bought them. Because when you are willing to spend Rs 4.7 million, you can easily buy a Toyota Aqua or a used Axio for that price, which would allow a person to travel from Galle to Jaffna without any problem. There are plenty of petrol stations, the vehicle is hybrid and is good on fuel then no one looks at the electric car. That is why I am saying if the price is not right, we will not be able to get the electric cars on the road.

Have you considered importing electric cars with smaller engines?

A: A lot of people have asked me this question in recent days, 'why can't we bring down electric cars with a smaller motor?' There are cheaper cars in China, there is a wide variety used in the Chinese market, but we are still not sure of the quality of these vehicles.

The other thing is that Nissan is a known brand, Nissan vehicles have been in the country since the 1970s and there is no need to convince someone of the quality of a Nissan vehicle. But that is not the case with Chinese cars, they are a completely new product and if we bring a Chinese model we will have to spend a lot of time and resources explaining to the people what the car is, how reliable it is and so forth.

So, all things considered Nissan Leaf is a good car and if the Government gives a better deal on this car, people will buy it. When the duty was 5 per cent some time back, the vehicle was priced between 2.7 and 3 million rupees, and a lot of people bought electric cars. But all of a sudden the duty went from 5 per cent to 50 per cent, after that the demand went down rapidly. I don't expect the duty to come down to the 5 per cent level but the Government must look at a reasonable duty structure so that the car can be marketed. However, I am confident that the Minister will consider this.

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