Used Jap Vehicle Traders Fear Business Decline

[azhar]

Used Jap vehicle traders fear business decline

By Azhar Razak

Sri Lankan importers of used Japanese vehicles last week said that there had been a considerable slump in demand for reconditioned Japanese vehicles of late, as prices have gone up, making these vehicles being unaffordable to many, mainly due to a rule imposed last year allowing the importation of vehicles of only up to two years old. While requesting the government to consider extending this age of imported vehicles to two and a half years in its forthcoming Budget, they warn that Sri Lanka will likely to be infiltrated with lower standard vehicles produced from non-Japanese Asian countries, if the government fails to adhere to their proposal.

“Japanese vehicles are increasingly becoming unaffordable to the majority of Sri Lankans because due to the two year old rule imposed last year, it has been very difficult to find vehicles in Japan, to fit this criterion,” President of the Vehicle Importers’ Association, y@ga p#re#a told reporters at a media conference held last week.

Explaining further he said that in Japan, prices of most vehicles started falling only once a compulsory Road Licensing Test was taken at two years and therefore if the government increased the age of imported vehicles to two-and-a half years they could then buy at lower prices and pass that on to customers by reducing the price as older vehicles were also subject to lower duty.

“In Japan, for brand new cars, the first road license is given for two years, so most users prefer to sell only after two years. If they sell earlier it is usually because of a defect in the vehicle. So it is difficult for us to buy two-year-old vehicles of good standard at a reasonable price,” Perera, who is also the Chairman and Managing Director at Auto Land, said.

He noted that Japanese vehicles were far more superior to vehicles imported from other Asian countries with pollution not being a factor for consideration, until they were at least five years old, since they conformed with many international quality standards.

“It’s advanced technology and durability that the Japanese cars afford as against the sub-standard cars that do not adhere to the Euro Standard Conformity that are being imported from Asian countries using outdated technology and redundant molds dispatched from developed countries,” Yoga said.

He identified that the main reason behind the need of a Japanese car is due to the fact that Sri Lankans have enjoyed and experienced the use of Japanese reconditioned vehicles over the past 40 years.

“If they were to be given the choice between a brand new and reconditioned vehicle, the majorities choice would be for the reconditioned vehicle,” Perera assured.

Meanwhile, the Vehicle Importers Association, which represents around 100 used car dealers, further requested the Government to properly regulate the VAT component in order to avoid a double Value Added Tax (VAT) situation they were faced at present. “For vehicles imported before December 31, 2010 and being sold this year, we now pay VAT twice both at the point of clearing them from customs and again at the point of sale. The 12 percent VAT we have to pay twice for the same vehicle as the VAT reclaim from customers has been disallowed for vehicles that were in stock,” the Association President said concluding that if the above two proposals are taken into favourable consideration in the 2012 Budget, the importers will be in a strong position to supply a reasonably priced vehicle around Rs. 2 million since the majority of customers in Sri Lanka are those who are within this budget.

http://www.thebottomline.lk/2011/11/13/page3.html

[MrCat]

Aaaaand why should we care when used Jap vehicle traders fear?

[MeanGreenZ28]

I think what he's trying to say is that most cars will be out of reach for the general population and therefore reduce their sales or even make them go bankrupt, which is a valid point. And for the consumer, a quality automobile will be out of reach and the substandard vehicles they can afford may cost them more in the long run or even their life should the unfortunate happen.

[Sylvi]

Members,

My post is not against Automobile dealers or importers.

I too was a importer of motor Vehicles to Srilanka but, I am a blue-collar worker so I selected my carrier, to service the automobile service industry in Srilanka.

Most of Automobile trades started with one vehicle.I too started with one vehicle. I do not know the reason for them to fear that government impose the any further restrictions for age of vehicles what they import, even Vat is claimed twice at the import point and at the sales point.They still have a very good profit on a vehicle sale.Big timers will never sell a Vehicle at a loss. One big timer Yesterday launched a Chinese Double cab.

All Automobile stocks will go up in price. No importer will sell a vehicle under cost.If they cannot sell a vehicle with a reasonable profit they will have to close down. like about one year back most Vehicle importers closed their businesses. Due to high cost of duty. Big timers survived.

Immediately after the government reduced the duty new importers mushroomed.

Big time importers started importing in bulk more than 100 Vehicles for a month.

There was a New category of importers were born to the Motor vehicle trade by obtaining Inland revenue department bank customs Requirements and importing one vehicle selling that below the selling price of big time importers.This was a big blow to the established importers.

Disadvantage with them was that they could not give a VAT invoice. So it was difficult for buyers to find a finance company to get a lease.

See the stocks all big time importers have that is all profits they have made in previous imports and they must be happy the position they are in today,in Automobile import business.Before 1977 there were all British and European cars were imported by foreign companies.

I was victim of a Chinese new Vehicle which was build in China with 1999 Suzuki technology.I lost 1.5 Million on that vehicle due to engine and brake problem. and due to the agent did not have facility to maintain that vehicle correctly.

Now I use a Indian 2 Vehicles, will acquire another Chinese truck within few days.

The leasing companies are very flexible they have minimum paper work give a lease with 1 guarantor. They give 60% lease for a Chinese vehicle. 100% for a Indian Vehicle.

No importer should fear of any new restrictions imposing in to this country only for some time they will not have business tittle by little people will get use to increased prices in our country.

Today Chinese and Indian Vehicles are build in thousands and sold around the Globe. If they produce vehicles in poor stranded they will not be able to build Vehicles sell and survive.

Like India did in early 1960s getting British and European technology and started Laylend, Morris oxford, Fiat.Now with their open economy they produce most advanced Vehicles in the world.

Above is my opinion on the Vehicle imports and selling in Srilanka.

Sylvi Wijesinghe.

[defendertdi]

i too agree with Mr. Sylvi...

When the Duty decreases in SL ,JP auction prices increases so no one can get the benefit from Tax reduction.....

This was not happened before 2010 period....this thing happen after 2010 because of these new bunch of importers ......... You can witness it when you go through statistical details of Auction in JP

[xlr8r]

I think they have missed out a main point where the gov. allowing individuals to import vehicles. Only registered vehicle importers should be allowed to import vehicles. This is the reason why u see prices going up in the auction. Personal importers pay a higher price than the sellers. They have no intention of selling nor having any profit so they pay little less than the local market n pay high prices in japan. So the sellers too have to compete with these buyers so obviously the prices go up.

Another matter is the 2 year restriction is baseless. Take a good look at the vehicles on our roads. Most are out dated and hacked. ppl here mostly don't maintain cars no where near how japs do. in other words its safe to say a 2 year old jap car is way better than a 6 month old brand new car in SL (condition n maintanence wise). So its plain stupid for the gov to restrict at 2 years. Rather they should increase duty n make it 3 1/2 years or more. Then there are plenty of good vehicles in japan for lower price n with a higher duty gov can make their cut n less money will go outa the country.

Also i think the president of the Vehicle Importers’ Association has made some good points to ponder. Why would u pay more for a cheaply made chinese or indian vehicle if u can pay the same for a built solid Japanese vehicle.

Brand new doesn't always mean a good investment when u think of the long run. That's where lot of ppl go wrong when it comes to maintenance n resale.

Edited November 16, 2011 by xlr8r

[techlove]

Hey Sylvi,I am confused here!

You say you were a victim of a new chinese vehicle and still will get another chinese truck?

And India produce most advanced vehicles in the world ???? Since when?

[Sylvi]

Techlove,

I am a Automobile all round qualified technician. I never fear for low quality Automobiles. As according to some members of the forum.

I mentioned about (One big timer Yesterday launched a Chinese Double cab) At that launch I bought with a advance of Rupees 5000.00 a Duel purpose Vehicle. Wanted Finance with few reputed companies Almost all of them were negative for Chinese Vehicle.

For Information of the members, I send my Manager last morning to PEOPLE LEASING FINANCE PLC, Kollupitiya, they immediately send their investigating officer to my place, this is the first occasion I went out of reputed finance companies.

Not even 20 hours my lease was approved and Delivery order was handed over to me before 11.30AM this morning.

This is wonderful and 5 star treatment they give to their Customers.

I can mention their service is the fastest financing service I have come across in this country.

Now I answer your 2nd Question.

As far as I know the Mercedes Benz is assembled in India.I need not mention the others.

Sylvi Wijesinghe.

[vishkid]

2 year old Jap car is better than a 6 month old (Euro/Jap/Korean ..even Indian/Chinese) car (assuming we are comparing apples to apples) ...????

Wow, that's the sort of logic that makes Sri Lanka the most wonderful country of all!!

Imagine a 2 year old Axio looking down at a 6 month old A4 in disgust!

[xlr8r]

2 year old Jap car is better than a 6 month old (Euro/Jap/Korean ..even Indian/Chinese) car (assuming we are comparing apples to apples) ...????

Wow, that's the sort of logic that makes Sri Lanka the most wonderful country of all!!

Imagine a 2 year old Axio looking down at a 6 month old A4 in disgust!

What i meant was the useage of vehicles in SL. Not comparing any brands. Audi A4 n AXIO looks more like apples to oranges. If u compare a AXIO n a 141 u will know what i mean.

[Gummybr]

Well for me this write up is very misleading.

1. Yes the government came up with a 2 year age cap on vehicles that can be imported, but in the same way they have reduced the depreciation for the two year old vehicle to more than what was given for a 3 1/2 year old vehicle earlier.

2. Japanese vehicles have not been cheep for sometime, as in not affordable to the general purchaser, the so called used vehicle importers played a hand in the Japanese auction prices going up. There were massive number of imports when the duty was reduced, hence the auction prices went up and along with them the selling prices in Sri Lanka.

3. Korean and Malaysian cars were the cheapest that you could by as a recon, or used unregistered before the duty came down. As you know in the global market the Koreans have come a long way and are now producing good vehicles which are as good as Japanese. So they are no more inferior vehicles. But you will see that because of the duty reduction such imports have gone down.

4. If you go around the country and observe the number of new car importers and their stocks, you sometimes wonder what sort of chaos would happen when all these vehicles are put on the roads. The point here is that the number of car importers have gone up, and there is fierce competition in the market with some ot been able to dispose of their stocks for a long period.

My take on this whole article matter is that with the next budget the age limit will be further lessened.

[kush]

The price increse in Japanese vehicles mainly due to the unfavorable JPY exchange rate

Jan 2008 1 JPY = Rs. 0.95

Jan 2009 1 JPY = Rs. 1.27

Jan 2010 1 JPY = Rs. 1.23

Jan 2011 1 JPY = Rs. 1.36

Today 1 JPY = Rs. 1.41

Technically a Japanese car cost 40-50% now compared to 2008 and are fast becoming uncompetitive compared to Korian and Euro vehicles.

One can't expect the goverment to give concessions to make Japs more attractive.

[Sylvi]

Members,

The best I can suggest is stop all used vehicles, only allow new Vehicles to import to this country.

Give more incentives to assemble a utility vehicles which will be cheap to Srilankan buyers. Like Bajaj which is totally assembled in Srilanka down south, imported in CKD form from India.

I am not criticizing the existing manufacturer/assembler, that establishment is not catering to the customers properly. After market service is not good at all. Booking list for their Vehicles are three to five months. They exported few vehicles without fulfilling the Srilankan market.

Sylvi Wijesinghe.

[vishkid]

What i meant was the useage of vehicles in SL. Not comparing any brands. Audi A4 n AXIO looks more like apples to oranges. If u compare a AXIO n a 141 u will know what i mean.

So you're saying specifications aside, a brand new 141 with 2k on the clock, is crap compared to a 2 year old Axio with 25k on the clock?

I'm genuinely flabbergasted.

(note that I would tend to believe this .. if I were to be a car salesman struggling to move my stock of two dozen Axio's with the inflated price).

[The Don]

Members,

The best I can suggest is stop all used vehicles, only allow new Vehicles to import to this country.

Give more incentives to assemble a utility vehicles which will be cheap to Srilankan buyers. Like Bajaj which is totally assembled in Srilanka down south, imported in CKD form from India.

I am not criticizing the existing manufacturer/assembler, that establishment is not catering to the customers properly. After market service is not good at all. Booking list for their Vehicles are three to five months. They exported few vehicles without fulfilling the Srilankan market.

Sylvi Wijesinghe.

Sylvi, there is some truth in what you say. Protectionist market policies can aid domestic manufacturers. But in this case it will deal a hammer blow to the vehicle importer industry which does employ quite a lot of people. There are pros and cons to all arguments.

There is also a case for limiting the number of vehicles being imported through taxation, as we have limited infrastructure and expansion capabilities and promote good public transport as a viable option. Of course as an automotive enthusiast I'll be biased against it but the fact remains our roads can't handle an infinite number of motor vehicles.

But I am very strongly against banning used vehicle imports altogether, as, as consumers we deserve to have choice and options and the promotion of vehicles of a certainly country more than others.

[Sylvi]

Sylvi, there is some truth in what you say. Protectionist market policies can aid domestic manufacturers. But in this case it will deal a hammer blow to the vehicle importer industry which does employ quite a lot of people. There are pros and cons to all arguments.

There is also a case for limiting the number of vehicles being imported through taxation, as we have limited infrastructure and expansion capabilities and promote good public transport as a viable option. Of course as an automotive enthusiast I'll be biased against it but the fact remains our roads can't handle an infinite number of motor vehicles.

But I am very strongly against banning used vehicle imports altogether, as, as consumers we deserve to have choice and options and the promotion of vehicles of a certainly country more than others.

'The Don',

I agree to your certain comets of your post, If I AM not mistaken first to restrict import of motor vehicles by high taxation was Thailand then Singapore, I think Singapore give a tax benefit if you export a used vehicle.

Srilanka imposed impossible taxes for motor vehicles. then there was a significant reduction but later government reduced the taxes. again vehicles started coming in. Again taxes were increased at the moment there is a small drop on sales.

The two year old used cars which come in are almost like new cars. I being a technician I think it is better to restrict only to new cars so that motorists will have trouble free cars for them to use.

If the government decides only to allow new cars will be a big effect to used vehicle importers as you mention because there are plenty of people living on grooming the, as it is used vehicles before they come to their show rooms. I think there are more than 20000 used motor vehicles in Srilanka with the dealers for sale.

If you see the price difference of two year old vehicle and a new one will be around 2 Million. A person who pays 5 million for a used vehicle definitely can pay extra 2 million for a new vehicle.

As you mention about the infrastructure we are still far behind to our neighboring countries in road development.

Above is my opinion.

Sylvi Wijesinghe.

Edited November 19, 2011 by Sylvi

[makom]

Japan vehicle traders issued this statement expecting more restriction in the budget. Nothing changed, that is good, and same good business will continue.

[Sylvi]

Members,

One post says Hybrid cars tax down to 8%.

Sylvi Wijesinghe.