Surging Yen To Undermine Motor Tax Cut

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Surging Yen to undermine motor tax cut

Another tariff revision for vehicles in the offing?

By Santhush Fernando

While motor industry analysts anticipate another tariff revision, vehicle importers are sceptical as to whether prices of Japanese vehicles will really come down, because of the surging yen.

“We are unable to ascertain the real impact of the June tariff cut, until prices stabilise, hopefully by around October. What has happened is that vehicles ordered in June are expected only by mid September,” Ceylon Motor Traders Association (CMTA) chairperson Zeeniya Rasheed told The Bottom Line.

“If the yen appreciates at this rate, the price of a Japanese vehicle may be, in fact, a little higher than what it was before the duty cut,” she added.

According to her, a Japanese vehicle worth around yen 1 million two years ago, was selling at Rs 3.6 million in Sri Lanka then, under the exchange rate of Rs 0.9 per Yen.

“Had the yen rate been the same, under the new tariff regime, the same vehicle would cost around Rs 2.5 million, which is a saving of nearly Rs 1.1 million,”

“However, though duties have come down, price could still go higher, due to the appreciating yen. In the last two years, the yen has appreciated by nearly 45%. Now that a yen is Rs 1.3, a vehicle worth Yen 1 million, will be over Rs 3.611 million,”

According to her, car importers had curtailed ordering new stocks, as sales for 2009 were very low.

“Those who had stocks are selling at a loss now. Except for Indian vehicles which arrived in August, delivery of Japanese vehicles will start mid September,” Rasheed said.

“In June, there was no marked increase of vehicle sales, while July saw an increase. Bigger categories still have not shown a marked increase, though small vehicles, which were selling about 150 units on average from January to June, have seen sales triple to 450 units in July,”

She, however, said the yen dilemma would not affect the Indian and Chinese vehicle markets in the country.

Asked whether there was any substance in the rumour over the second duty cut, making the rounds, she said they were mere speculation.

“That’s just hearsay. We are not in a position to comment about it. However, we are very grateful to the government for reviving the motor industry, which was dying,”

http://www.thebottomline.lk/2010/08/29/page1.html

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Fiat India bets big on car exports to Sri Lanka

New Delhi Car maker, Fiat India Automobiles Ltd (FIAL) may supply cars to the Asian subcontinents including neighbouring countries of India like Bhutan, Sri Lanka and Nepal by this year end.

The company is reported to be considering to enter the Bangladesh market by next year. The company already exports some of its successful models including Linea, Punto and Palio to South Africa.

On the sidelines of a SIAM summit here, a top company official informed that the company sees opportunities in the neighbouring markets, especially Sri Lanka, where the government has reduced the import duty on new cars, an agency report noted.

The Sri Lanka government had brought down the import duty to 117% from over 200% on the new car imports.