CB expects slowdown in vehicle imports due to fuel price hike, rupee depreciation

• Motor vehicle imports in Feb. up 121.1% to US $ 113.7mn
• Up 77.9% to US $ 208.8mn for first two months of the year 

By Indika Sakalasooriya

The Central Bank expects a slowdown in motor vehicle imports to the country with the recent hike in fuel prices and depreciation of the rupee.

Expenditure on motor vehicle imports more than doubled to US $ 113.7 million in February from a year ago, and the cumulative expenditure on vehicle imports for the first two months of this year stood at US $ 208.8 million, up 77.9 percent year-on-year (YoY).

“We are concerned about and we are focusing upon. There are macro prudential measures that we can take if the demand persists.

But now with the fuel price hike and the depreciation of the currency, the situation might lead to a correction. We are closely monitoring that,” Central Bank Governor Indrajit Coomaraswamy told reporters in Colombo last Friday.

The government last week jacked up fuel prices for the first time since 2015 and introduced a formula that would re-price fuel every two months. 

.The Central Bank said the rupee depreciated by 3.2 percent against the U.S. dollar as of last Friday.

According to vehicle registration data compiled by JB Securities, a Colombo-based equity brokerage, a surge in motorcar registrations was seen in the month of March.

Sri Lanka registered 5, 968 motorcars during March, a significant increase from 4, 799 units in February and 2, 879 units recorded 12 months ago.

Small Japanese-made cars, which are popularly known as ‘Kei’ cars are flooding the Sri Lankan market along with Indian-made compact cars, the most affordable segment. 

The lack of proper public transportation in Colombo, particularly has led every middle-class family in the country aspiring for a personal vehicle, which ultimately results in clogging the roads in the country’s capital city.

 On average, a person who commutes to work in his/her personal car to the Colombo’s central business district from the suburbs, spends around 3-4 hours on the road everyday, which includes the return trip home. 

As a result of heavy traffic, specially buses, motorcycles and three-wheelers pay scant regard to road rules, making driving on Colombo roads a nightmare for law abiding citizens.