For many people, a car is more than just a way to get from point A to point B. When purchasing a car, most people buy new or used vehicles from car dealers, who act as the middleman between the car manufacturer and the end consumer. Becoming a car dealer is not a difficult task [...]

Business Times

Licence to motor trade; the need of the hour


For many people, a car is more than just a way to get from point A to point B.

When purchasing a car, most people buy new or used vehicles from car dealers, who act as the middleman between the car manufacturer and the end consumer.

Becoming a car dealer is not a difficult task for any Sri Lankan as every Tom Dick and Harry can become a motor trader with ease.

There are no requirements to start selling cars in the island nation whereas countries like the US, Canada, Australia, etc have several strict requirements including the licence to operate.

The Ontario Motor Vehicle Industry Council (OMVIC) in Canada issues the required licences for prospective car dealers.

In addition to applications and fees that need to be paid, dealers in that country are also required to study an Automotive Certification Course.

The goals of the OMVIC are to protect consumers and ensure fair and open competition for registered motor vehicle dealers.

A government licence is compulsory for a sole proprietor, partnership, limited partnership or corporation in that country.

Here, every vehicle that is imported to Sri Lanka is done so through a Sri Lankan motor trader who will deal with the complex taxation and legal policies in order to make it easier for a typical Sri Lankan buyer to purchase their dream car.

As a result, hundreds of dealers, small and medium scale importers and middlemen have stepped into import Japanese, European, American as well as vehicles manufactured in other countries to Sri Lanka.

Some of these distributors have also specialised in importing particular vehicle brands to the country.

The time is now opportune to streamline Sri Lanka’s motor trade by introducing a vehicle dealer licensing system to increase the revenue of the government by way of levying licences fee and get all those traders under tax net.

It is also essential to prevent the mushrooming of vehicle sale centres and importers of used cars as importation of vehicles will drain the country’s much needed foreign exchange.

The Government has introduced an annual licence fee of Rs.1.5 million for brand new and used vehicle importers from the 2016 budget by former Finance Minister Ravi Karunanayake.

But this budget proposal was not implemented following protests of used car importers and small time vehicle dealers.

They claimed that Sri Lanka’s small and medium scale importers of vehicles are under severe pressure with the new requirement of an annual licence fee.

Sri Lankan coffers have been deprived of targeted revenue of Rs. 375 million by not implementing this budget proposal and it has also lost an opportunity to get hundreds of motor dealers into the corporate tax net.

Under the present Finance Minister Mangala Samaraweera’s go green initiative the government has prohibited importing vehicles which are not equipped with safety features such as air bags, seat belts and below the emission levels or their equivalent as prescribed by Euro IV fuel standard with effect from July 1.

The effective date has been extended to July 1 from January 1 as proposed in the 2017 budget heeding to the requests made by the motor vehicle importers and manufacturers for more time to make the required adjustments and comply with the proposed emission standards and safety measures.

Most of the motor traders are already importing vehicles with engines compatible for BS IV Euro IV fuel standard from India and other countries.

But local truck, Mitsubishi and Isuzu vehicle importers will be affected as those engines were Euro 2 compatible.

The Government has taken a correct decision to make Sri Lanka green and the introduction of the Euro 4 standard is in the right direction towards this end.

However the authorities should extend the period of implementation of this decision at least by six months or one year as motor traders have already ordered vehicles that are Euro 2 or 3 compatible engines which will arrive in the island early next year.

Franchise holders should be given some grace period to bring down vehicles with Euro IV engines.

Indian-made vehicle engines compatible for BS 4 standard fuel which is equivalent to Euro IV and such vehicles have not been provided with basic safety features such as airbags and anti-lock braking systems which will be made compulsory for all car imports.

On the other hand the Ceylon Petroleum Corporation (CPC) and Lanka IOC should give a certification that their petrol sheds have shifted to Euro IV from Euro 2 and 3 and it should be made available in rural area petrol sheds as well.

This transition should be phased out as the country’s fleet of vehicles is currently compatible with Euro 2 standard and it is difficult to remove these vehicles off the roads within a short period.

The CPC and Lanka IOC should continue to serve Euro 2 and 3 standard fuels for some time while selling Euro IV fuel for newly imported vehicles.

The introduction of Euro IV will also help to get rid of the 3-wheeler menace as these tuk-tuks run on engines only compatible to Euro 2.

(The writer is a former chairman of the Ceylon Motor Traders Association and currently Managing Director at Sathosa Motors).

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