Import Tax Slashed By 50%

isurujosh · August 16, 2010

what goes up never comes down. that is the right theory for SL . but i think if the duty reduction persists then prices will be subjected to a steady but slow decline. some cars are already suffering. my friend has a corolla ae100 sedan in very good condition and he struggles to sell it for months now for bit lower price than what he bought it for couple of years ago or so. i think corolla 110 is next. i think corolla 121 has reduced more than 10% already.

oh bdw 10%+ reduction in general price within 3 months is a crash in some way especially when you annualise it.

Edited August 16, 2010 by isurujosh

Rebel · August 16, 2010

L board said:
Ok gentlement I must be very humble and admit that you guys were correct and I was wrong. And right now actually I have put my foot in my mouth....
I have also not seen a drastic reduction in the 2nd hand market and I do not expect any miracle in 2 more weeks either. So those of you who stood by the theory that the second hand market will not be drastically affected are correct and for sure I was wrong. I will do a better try next time (first let me treat my wounded mouth and foot)

Hey mate. I guess its a different market dynamic that works in SL. Both in the CSE and the Car market.

Hopefully we can upgrade our cars huh..

Sifaan · August 17, 2010

isurujosh said:
oh bdw 10%+ reduction in general price within 3 months is a crash in some way especially when you annualise it.

if by annualise you mean that it will reduce 10% every 3 months then yes, 40% drop in a year would be a crash.

but what we have is max. ~30% drop in price of unregistered vehicels, and that cascades back to maybe ~10% for vehicles 10 years old. No reason for a 10 year old car to drop 40% mainly because most people still can't afford to buy an unregistered car. (only that the guy who could earlier only afford an AE100 now tries to put in a little more and get a 110, and the 110 buyer tries to get a 121, etc).

Impact should be more for fast moving cars (because buyers/sellers have more choices), and lesser for European cars (e.g. the guy who was thinking of getting a 2001-03 model Passat still doesn't have much of a choice because not many post-2003 euro cars in the used car market; similarly someone looking for a 406 D9 probably still can't make the jump to a 407)

Right now IMHO prices are still stabilising in the market (e.g. there are people who live in a well and say "the duty reduction is only for unregisted vehicles, so registered vehicles price shouldn't change" and try to sell for more or end up buying for more) so it should reduce a little bit more over next few months.

The story of auction prices increasing in Japan can also keep prices up a bit. Does anyone know what percentage of JDM auction vehicles come to Sri Lanka? (i.e. if 100 vehicles are sold, how many are sold to Sri Lanka?). I think it can only be a small part, so if our demand is pushing up prices it can only be because a lot of people who couldn't afford a recon for the last 7 years are rushing to buy one now

If that's the case that should also stabilise down in a few months.

harshansenadhir · August 17, 2010

Sifaan said:
if by annualise you mean that it will reduce 10% every 3 months then yes, 40% drop in a year would be a crash.
but what we have is max. ~30% drop in price of unregistered vehicels, and that cascades back to maybe ~10% for vehicles 10 years old. No reason for a 10 year old car to drop 40% mainly because most people still can't afford to buy an unregistered car. (only that the guy who could earlier only afford an AE100 now tries to put in a little more and get a 110, and the 110 buyer tries to get a 121, etc).

Impact should be more for fast moving cars (because buyers/sellers have more choices), and lesser for European cars (e.g. the guy who was thinking of getting a 2001-03 model Passat still doesn't have much of a choice because not many post-2003 euro cars in the used car market; similarly someone looking for a 406 D9 probably still can't make the jump to a 407)

Right now IMHO prices are still stabilising in the market (e.g. there are people who live in a well and say "the duty reduction is only for unregisted vehicles, so registered vehicles price shouldn't change" and try to sell for more or end up buying for more) so it should reduce a little bit more over next few months.

The story of auction prices increasing in Japan can also keep prices up a bit. Does anyone know what percentage of JDM auction vehicles come to Sri Lanka? (i.e. if 100 vehicles are sold, how many are sold to Sri Lanka?). I think it can only be a small part, so if our demand is pushing up prices it can only be because a lot of people who couldn't afford a recon for the last 7 years are rushing to buy one now

If that's the case that should also stabilise down in a few months.

there's one main reason as to why second hand market doesn't crash and second hand vehicles have a demand unlike other countries. That is government policy creation still favouring second hand/used/old vehicles.

If the policies are such that to demotivate a person from buying a vehicle older than 5 years, say by having higher revenue licenses for old vehicles, introducing strict fitness tests and tag as classics and remove from day today use when the vehicle is 10~15 years old, yes then there's a possibility to divert the demand from second hand market to brand new/un reg market.

As of now it's the cascade/chain impact what you have mentioned. Lower the price tag of the used vehicle or in another words higher the price difference from brand new prices vs the price of used vehicle, then there will be minimal or no impact on the respective second hand vehicle prices.

one of main reasons for auction prices to jack up is the YOM limit our country has, that is 3 years plus not every model is popular here, it's only a handful of models people would choose to import even from infamous Toyota brand. So it creates a niche market for said makes/models.

MkX · August 17, 2010

Sifaan said:
if by annualise you mean that it will reduce 10% every 3 months then yes, 40% drop in a year would be a crash.
but what we have is max. ~30% drop in price of unregistered vehicels, and that cascades back to maybe ~10% for vehicles 10 years old. No reason for a 10 year old car to drop 40% mainly because most people still can't afford to buy an unregistered car. (only that the guy who could earlier only afford an AE100 now tries to put in a little more and get a 110, and the 110 buyer tries to get a 121, etc).

Impact should be more for fast moving cars (because buyers/sellers have more choices), and lesser for European cars (e.g. the guy who was thinking of getting a 2001-03 model Passat still doesn't have much of a choice because not many post-2003 euro cars in the used car market; similarly someone looking for a 406 D9 probably still can't make the jump to a 407)

Even for fast moving Japs in below 1.5 - 1.6M market will not crash actually. There wont be recon 1995 - 2005 imports due to YOM restrictions. So what ever the price changes in this market will not have major impact even after another 3 months I guess.

lasi · August 17, 2010

MkX said:
Even for fast moving Japs in below 1.5 - 1.6M market will not crash actually. There wont be recon 1995 - 2005 imports due to YOM restrictions. So what ever the price changes in this market will not have major impact even after another 3 months I guess.

I think, even though there are no recondition imports below YOM 2007, the availability of a recondition model of a successor model will be having an impact on previous models. take Corolla for an example, Corolla 121 price has already come down because of new Axio. So, as I know, people prefer 2000 121 than 2003 Vios. correct? now the path is opened for them buy 121. Therefore, Vios also should come down, because of reduced 121 prices.

Sifaan · August 17, 2010

lasi said:
I think, even though there are no recondition imports below YOM 2007, the availability of a recondition model of a successor model will be having an impact on previous models. take Corolla for an example, Corolla 121 price has already come down because of new Axio. So, as I know, people prefer 2000 121 than 2003 Vios. correct? now the path is opened for them buy 121. Therefore, Vios also should come down, because of reduced 121 prices.

that's the cascade effect we've mentioned

MkX · August 17, 2010

lasi said:
I think, even though there are no recondition imports below YOM 2007, the availability of a recondition model of a successor model will be having an impact on previous models. take Corolla for an example, Corolla 121 price has already come down because of new Axio. So, as I know, people prefer 2000 121 than 2003 Vios. correct? now the path is opened for them buy 121. Therefore, Vios also should come down, because of reduced 121 prices.

I was talking about 1.5M market. it is highly unlikely that 121 will come down to 1.6M - 1.7M range in near future. After 3 months of the tax reduction no noticable change in 1M - 1.5M price range. Thare about 5% - 10% reduction in 2M range. But it is not the most attractive market for middle class people who can spend maximum 1.5M for a car. This is also the includes group that buy the Brand new Marutis.

So what ever the cascade effect will not come down to 1.5M and below range as expected by some of us. So if you are already paying for the housing loan and just manged to save few hundred thousands and hoping to buy 110 for 8 laks. You have wait some more months.. or couple of years IMO. But lets see another 3 months.

Edited August 17, 2010 by MkX

xXx · August 17, 2010

harshansenadhir said:
one of main reasons for auction prices to jack up is the YOM limit our country has, that is 3 years plus not every model is popular here, it's only a handful of models people would choose to import even from infamous Toyota brand. So it creates a niche market for said makes/models.

Very well said Harshan. Number of locally popular models can be simply counted using both hands.

Another reason is the poor condition of the Japanese economy (compared to what it was a decade ago, remember with a zero unemployment rate) Japs now tend to use their cars for longer. Therefore the number of cars (within 3.5 year limit) available at auctions has reduced too.

xXx · August 17, 2010

Forgot to mention, there's still a degree of uncertainty about the future of the new duty scheme. Because of that lot of importers want to stock up. At the same time this uncertainty is driving buyer to settle for a new car sooner than later driving the demand higher.

nilakicha · August 17, 2010

Having had a time deciding from a Diesel Manual Noah, to a Legacy B4 (import) and finally somehow settling at a Petrol Manual Import, I couldn't help but look for a Import Taxation Calculator or Regulations for import and somehow, came across the following info, which I thought might be useful.

HS Codes or Harmonized System code is a classification system, and for us lot, Vehicles are classified as in the below link, which is useful in the second link.

Import Export Bulletin Board - HS-Codes: Vehicles, Aircraft, Vessels & associated Transport Equipment

http://www.imexbb.com/hs-codes/vehicles-ai...-equipment.html

Sri Lanka Customs Tax Calculation - Using the above HS Code - 8703 i think applies to us most.

http://www.customs.gov.lk/TC/Sheet1$_list.asp

You can roughly calculate the total tax component based on CIF price. Quite handy but I still think there's a lot more taxation to be added to the end figure.

Edited August 17, 2010 by nilakicha

Sifaan · August 18, 2010

MkX said:
I was talking about 1.5M market. it is highly unlikely that 121 will come down to 1.6M - 1.7M range in near future. After 3 months of the tax reduction no noticable change in 1M - 1.5M price range. Thare about 5% - 10% reduction in 2M range. But it is not the most attractive market for middle class people who can spend maximum 1.5M for a car. This is also the includes group that buy the Brand new Marutis.
So what ever the cascade effect will not come down to 1.5M and below range as expected by some of us. So if you are already paying for the housing loan and just manged to save few hundred thousands and hoping to buy 110 for 8 laks. You have wait some more months.. or couple of years IMO. But lets see another 3 months.

121 prices were not in that league although price would reduce a bit on the newer registration models (depends on whether it's still possible to import 121 or not, I'm not sure if its still within 3.5 year limit or not)

110s are in the price bracket you mention and would have some reduction, but 110s are 2 steps away (141 -> 121 -> 110) and typically 10-12 years old so effect is less.

the older it gets, generally the less the cascade effect will be (so cars made in early 1990s or earlier, probably no change at all).

But there are more recent cars in that price bracket, like March K11 / K12 which have taken a hit. So for people in the market for a Maruti, the alternatives have got a bit cheaper, but not as much as the maruti itself got cheaper by.

MkX · August 18, 2010

Sifaan said:
121 prices were not in that league although price would reduce a bit on the newer registration models (depends on whether it's still possible to import 121 or not, I'm not sure if its still within 3.5 year limit or not)
110s are in the price bracket you mention and would have some reduction, but 110s are 2 steps away (141 -> 121 -> 110) and typically 10-12 years old so effect is less.

the older it gets, generally the less the cascade effect will be (so cars made in early 1990s or earlier, probably no change at all).

But there are more recent cars in that price bracket, like March K11 / K12 which have taken a hit. So for people in the market for a Maruti, the alternatives have got a bit cheaper, but not as much as the maruti itself got cheaper by.

In simple terms 1M - 1.6M or YOM 1990 - 2000/2 does not have major impact from the tax reduction.

MasterDon · August 18, 2010

L board said:
Ok gentlement I must be very humble and admit that you guys were correct and I was wrong. And right now actually I have put my foot in my mouth....
I have also not seen a drastic reduction in the 2nd hand market and I do not expect any miracle in 2 more weeks either. So those of you who stood by the theory that the second hand market will not be drastically affected are correct and for sure I was wrong. I will do a better try next time (first let me treat my wounded mouth and foot)

LOL...cheeky bugger!...took the easy way out eh

I dunno about you guys but I'm having a great time gloating to friends who were expecting to buy 50% less three months ago...a simple "I told you so" is very satisfying.

harshansenadhir · August 18, 2010

MasterDon said:
LOL...cheeky bugger!...took the easy way out eh
I dunno about you guys but I'm having a great time gloating to friends who were expecting to buy 50% less three months ago...a simple "I told you so" is very satisfying.

Ahh, feeling of being a fortune teller, talk about it. Besides verbal communication I gave away to my friends, this very thread have concrete proof to what I predicted

L board · August 18, 2010

harshansenadhir said:
Ahh, feeling of being a fortune teller, talk about it. Besides verbal communication I gave away to my friends, this very thread have concrete proof to what I predicted

Yes I believe you were spot on with your 10-15% drop which is precisely what we are seeing. What do you want to predict our personal futures also so accurately ha?

harshansenadhir · August 18, 2010

L board said:
What do you want to predict our personal futures also so accurately ha?

I was in fact responding to MasterDon on this 'I told you' tag line, now what are you up with predicting your personal future ? Is it too something to do with reducing taxes and market demand ?

L board · August 19, 2010

harshansenadhir said:
I was in fact responding to MasterDon on this 'I told you' tag line, now what are you up with predicting your personal future ? Is it too something to do with reducing taxes and market demand ?

Ouch... Foot in my mouth again....

harshansenadhir · August 19, 2010

L board said:
Ouch... Foot in my mouth again....

lol, seems you have developed a habbit of doing that.

AsankaAuto · August 20, 2010

Car prices will certainly go down in near future as more and more ppl start to import vehicles on their own (personally) without buying at a high price from car sales. So car sales wil have to reduce their prices to a reasonable level.

One of my friend just cleared a toyota allion NZT260 2007 black color car. As he told the total cost hasn't exceeded 4.4million.

TharakaWi · August 20, 2010

AsankaAuto said:
Car prices will certainly go down in near future as more and more ppl start to import vehicles on their own (personally) without buying at a high price from car sales. So car sales wil have to reduce their prices to a reasonable level.
One of my friend just cleared a toyota allion NZT260 2007 black color car. As he told the total cost hasn't exceeded 4.4million.

Sometime back, cars may have been available at such prices. But now certainly the japanese auction prices are high now. Toyota Axio, which was trading for around 1.25 mil jpy has now risen to 1.50 levels (in japan auctions). Belta which was goin around 1.1 mil has now risen to 1.4 levels. I too thought that the auction price and everything will come down as the time goes. But it all worked the other way . Like some forum members have said, in Sri Lanka what goes high remains high. Never comes down.

Actually the car sales guys have to pay extra as tax, as they have to pay for VAT. So obviously their cost is 3-4 lakhs more than an individual importer. Even if an individual imports a car and lease - he still will have to pay extra on VAT. Anyways, re-con car prices have risen sharply in last few weeks. I won't advice anyone play the waiting game.

arunajn · August 20, 2010

TharakaWi said:
Sometime back, cars may have been available at such prices. But now certainly the japanese auction prices are high now. Toyota Axio, which was trading for around 1.25 mil jpy has now risen to 1.50 levels (in japan auctions). Belta which was goin around 1.1 mil has now risen to 1.4 levels. I too thought that the auction price and everything will come down as the time goes. But it all worked the other way . Like some forum members have said, in Sri Lanka what goes high remains high. Never comes down.
Actually the car sales guys have to pay extra as tax, as they have to pay for VAT. So obviously their cost is 3-4 lakhs more than an individual importer. Even if an individual imports a car and lease - he still will have to pay extra on VAT. Anyways, re-con car prices have risen sharply in last few weeks. I won't advice anyone play the waiting game.

It seems some car Importers in this forum try to manipulate the situation. Even if the Car Importer or an individual, there won't be any difference in the VAT effect. As, ultimately buyer has to bear the VAT. Only difference will be BTT & the Finance Cost. I don't think those cost will be around 3-4 lacks???? Also if you try to find, in some reliable websites still the Belta will be around 1.1 Mn...But Belta 1.3cc will be around 1.4Mn...

Therefore if you are going to import a vehicle personally you can have a benefit of 3-5 lacks minimum.

Therefore I request the forum members who are willing to import vehicles don't depend on the statements of others...Try to find the accurate information instead of depend on unknown peoples opinion. (Sometime it may be a Car Importer's opinion.)

TharakaWi · August 20, 2010

arunajn said:
It seems some car Importers in this forum try to manipulate the situation. Even if the Car Importer or an individual, there won't be any difference in the VAT effect. As, ultimately buyer has to bear the VAT. Only difference will be BTT & the Finance Cost. I don't think those cost will be around 3-4 lacks???? Also if you try to find, in some reliable websites still the Belta will be around 1.1 Mn...But Belta 1.3cc will be around 1.4Mn...
Therefore if you are going to import a vehicle personally you can have a benefit of 3-5 lacks minimum.

Therefore I request the forum members who are willing to import vehicles don't depend on the statements of others...Try to find the accurate information instead of depend on unknown peoples opinion. (Sometime it may be a Car Importer's opinion.)

Yeah right... now i am a car importer!!!

I only gave my opinion from according to my knowledge... U sure have a different opinion, and I respect it... please learn to respect others opinions without trying to label them

Edited August 20, 2010 by TharakaWi

harshansenadhir · August 20, 2010

Think logically friends. Although tax reduction is good for the government income in terms of volume based tax income, there are serious adverse impacts of this move by letting huge amount of foreign reserves to flow out of the country. Tax income is again from internal money circulation and therefore net effect will be zero. (no gain of foreign reserves by tax income). Further, the demand for expensive, luxury vehicles were shoot up because of the savings/price drop for said category is higher, say few millions. This makes more foreign reserves to flow out as price tag of luxury vehicles are exorbitantly high. Therefore, there's no room or very very less room for government to further decrease taxes and motivate vehicle imports, instead they might tighten up screws again to stop/control this foreign currency outflow.

Edited August 20, 2010 by harshansenadhir

Ripper · August 20, 2010

harshansenadhir said:
Think logically friends. Although tax reduction is good for the government income in terms of volume based tax income, there are serious adverse impacts of this move by letting huge amount of foreign reserves to flow out of the country. Tax income is again from internal money circulation and therefore net effect will be zero. (no gain of foreign reserves by tax income). Further, the demand for expensive, luxury vehicles were shoot up because of the savings/price drop for said category is higher, say few millions. This makes more foreign reserves to flow out as price tag of luxury vehicles are exorbitantly high. Therefore, there's no room or very very less room for government to further decrease taxes and motivate vehicle imports, instead they might tighten up screws again to stop/control this foreign currency outflow.

1+

i do feel this would be a temp thing to give a boost. once that's achieved it might be taken away.