The recent curbs on vehicle imports appear to have finally stemmed the flow of motor vehicles to the country, although a dramatic fall in motor car registrations is not expected, at least in the next couple of months, as unsold cars lying in yards and on water could hit the roads. 

In September, new motor car registrations – a close proxy for imports – came down to 4,990 units, from 7,003 units in August, a monthly vehicle registration tracker compiled by J B Securities, a Colombo-based leading stockbrokerage, showed. 

The motor car registrations have been pulled down by the popular middle-income class compact car Suzuki Wagon R hybrid with a 600 CC engine.

The Wagon R registrations plunged by 31 percent from August. 

“The measures to slowdown vehicle imports three to four months ago are finally biting, which are evidenced in the registration figures,” said economist and JB Securities Managing Director Murtaza Jafferjee, in a note accompanying the registration tracker.

To curb the influx of small vehicle imports, the Finance and Mass Media Ministry raised the excise duties on vehicles less than 1,000cc, effective from August 1. 

However, that was not sufficient as the agents and dealers of pre-owned cars were little moved as they offered even discounts to woo the buyers to push the stocks.  

As the measure did only little to arrest the influx of vehicles amid a depreciating rupee, the Central Bank in September slapped a 100 percent LC margin on letters of credit for vehicle imports of non-commercial nature. 

Then the LC margin was raised to 200 percent a week later and the loan-to-value ratios on hybrid vehicle financing was revised down to 50 percent, from an earlier 70 percent. 

“There are yet a lot of inventory of unsold cars in yards or on water, thus one will not see a dramatic fall in registrations in the next three to four months, until it is sold,” Jafferjee noted.

Meanwhile, he said he had observed a noticeable entry of premium small engine cars, due to the relatively lower rate of excise duty and added that these were all entry-level models.

The Sri Lankan rupee has weakened by over 11 percent against the US dollar so for this year, with the returning of capital from emerging and frontier markets to advanced economies, with the raising of interest rates by the US Federal Reserve.

The global oil prices have also hit multi-year highs, as the prices at the Brent futures exchange is currently hovering closer to US $ 85 a barrel and is expected to reach US $ 100 a barrel in a not so distant future. 

Meanwhile, the registrations in three-wheelers fell to 1,418 units in September, from 1,670 units a month earlier. 

The two-wheeler registrations also fell to 23,914 units, from 30,042 units a month earlier. 

Overall, Sri Lanka registered 34,293 units of new vehicles in September, compared to 43,190 units in August and 36,755 units 12 months ago.