Financial Times

Budget moves won't bring down car prices
Government steps in the budget to extend the age of used car imports to 3.5 years from 3 years aimed at lowering car prices has been criticized by the Ceylon Motor Traders Association (CMTA) and surprisingly drawn little support from second-hand vehicle importers who were expected to benefit from this move.

The Executive Committee of the Ceylon Motor Traders Association (CMTA) said the move was counterproductive and would have a serious impact on the environment.
Berty Widanagamage, President of the Vehicle Importers Association of Sri Lanka said in a statement the decision wouldn't result in the expected fall in car prices.

"Consequent to the budget, Sri Lankan exporters resident in Japan are rushing to buy cars between the 3 to 3.5 year of age at the Japanese car auctions. As a result, the buying price of a car in this category has increased, almost to the price of cars less than 3 years of age, defeating the possible objective of the budget proposals to make reconditioned cars cheaper."

The CMTA said the budget proposal would definitely encourage the importation of (older used) cars which would create more pollution and vehicular exhaust emissions. It suggested that only vehicles upto 2 1/2- years -old be allowed to be imported.

Widanagamage said if the objective of the government is to make available cheaper cars the Depreciation Table applicable for importers of reconditioned cars must be adjusted.

" Under the current 'Depreciation Table' the import duty for a used car is around 200 percent of the buying of a car in Japan. This means that the import duty on reconditioned car is based on its original value, while the import duty on a brand new car is 87 percent of the invoice value of the car."

He said one would be able to know the actual impact of these changes proposed in the budget only after January 1, 2004 once a decision is made on quantum of Excise Duty.

"The objective specified in the budget speech is to provide Sri Lankans access to motor cars at a lower price, this can be realised only by introduction of a realistic Depreciation Table for used cars as the adjustment made to the current depreciation table will not have a material impact," Widanagamage stressed.

Commenting on the environmental aspect of using reconditioned cars, Widanagamage said, " Sri Lankan users of Japanese cars will confirm that cars imported from Japan are of good quality and that they provide trouble free running for many years, this is the reason why countries like the United Kingdom, Australia and many other developed countries permit import of used cars from Japan."

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