The number of vehicle registrations comprising both brand new and pre-owned vehicles has increased by a staggering 55% (232,687 units) to 660,199 in the year 2015 compared to year 2014, recent data showed. This is despite vehicle prices fluctuating in 2015 partly due to tax amendments, imposition of a Loan to Value (LTV) and escalating prices with the currency depreciating by an estimated 8% relative to the US Dollar in 2015. However, the new government which was installed in January brought fuel prices down, kept interest rates low and hiked public sector salaries thus boosting people’s disposable income.
“In 2015 Sri Lanka set a record as the number one destination for used car exports from Japan in terms of value – Malaysia being the next highest is almost 40% lower. The largest volume is to New Zealand but the unit value is low since they are old cars, alternatively we import relatively new cars being mainly hybrids and electrics,” MD/CEO at JB Securities (Pvt) Ltd, Murtaza Jafferjee said.
He said the main reason for the heightened demand for this category of vehicles was aggressive credit extension from commercial banks – financing rates came down to around Rs 19,000/month/Rs 1 million from around Rs 25,000/month/Rs 1 million –increasing affordability coupled with an overvalued exchange rate till September fuelled a massive increase in demand.
Meanwhile, according to monthly analysis, vehicle registration momentum came down in December 2015 with the reinstatement of the LTV rule and higher incidents of duty on vehicles.
Total motor car registrations recorded 7,177 units in December down from 10,084 units in November but significantly up from 4,311 units recorded 12 months ago. Brand new car registrations recorded 5,015 units in December down from the record set in November of 6,732 units but significantly up from 1,939 units recorded 12 months ago. Small cars (< 1,000 cc) accounted for 95% of volumes – Maruti accounted for 3,882 units (mainly Alto) followed by Micro with 522 units (Panda), Tata with 215 units (Nano Twist and Indica) and Hyundai with 191 units (Eon). Financing share in small cars is a high 75%.
“The 70% LTV rule is applicable to approvals NOT disbursements, thus the high finance share in Dec may be due to the spill over of Nov leasing approvals,” Jafferjee said.
Meanwhile, pre-owned car registrations recorded 2,162 units in Dec significantly down from 3,352 units in Nov and down from 2,372 units recorded 12 months ago. This is the lowest number in 2015, this category is mainly hybrids which were most impacted by the increase in tariffs.