Motor vehicle industry in Sri Lanka facing mass exodus

Motor vehicle industry in Sri Lanka facing mass exodus

The motor vehicle industry in Sri Lanka is facing a mass exodus as a result of the latest tax increases, the Ceylon Motor Traders Association said.

The Ceylon Motor Traders Association expressed serious concerns for the viability of the motor industry in the face of the latest increases in taxes proposed by the Government.

The Government imposed a complete import suspension on all types of vehicles (two wheelers, three wheelers, passenger cars & commercial vehicles) in March 2020 citing that it will be for a period of 06 months. But even after 31 months, the core products of the industry are still suspended and the Government has not provided any type of relief to the industry to date. Further, due to limitations in establishing LC’s over the last few months, the import of genuine spare parts also reduced, which directly impacted the after sales business, the key revenue line left for the motor companies.

Prior to the import ban, the membership of CMTA employed over 30,000 individuals while over 6,300 island-wide SME’s were managed as dealers, which fuelled the rural economy with over Rs. 2 Billion as dealer incentives. The CMTA members paid over Rs.6 Billion for outsourced services such as security, cleaning, logistics, storage etc, and facilitated vehicle finances of over Rs124 Billion, which sustained many jobs in several trades including leasing and insurance. The excise duty contribution from the motor trade was Rs.130 billion in 2019, which alone accounted for 6.8% of government revenue.

Charaka Perera, Chairman of CMTA said “Due to the import suspension, the motor trade has been crippled and has lost over 10,000 jobs during the last two years. Further, over 1,500 dealers, which were SME’s based island-wide, have closed down which has a direct impact on the rural economy. Stemming from the decline in business, the income of the employees has drastically reduced due to the lack of sales commissions and performance incentives while most of the CMTA Member companies have not been able to provide reasonable increments or bonuses to compensate for the increase in cost of living. In such a backdrop, the increase in inflation to over 64% has made it unsustainable to retain staff. Employees are moving out of the industry as well as out of the country, as they do not see a future within the motor industry. They can use the skills and experience gained to get sales and technical jobs in other countries. This is creating a severe talent drain for CMTA member companies and their operations are being hampered as a result”.

While the motor industry is facing such hardships, the impact of the announcement of the increased taxes for corporates and individuals would be unbearable to the motor trade as well as many other trades. Such a move would ensure a mass exodus of trained experienced employees, on whom the companies have heavily invested to train and who are not easily replaceable.

As such, the CMTA is requesting the Government to focus on multiple solutions such as reduction of government expenditure, increasing efficiency of SOEs, increasing the tax payer base and strengthening the tax collection systems, which would negate the requirement to drastically increase taxes for already tax paying corporates and salaried employees.

Founded in 1919, the Ceylon Motor Traders Association (CMTA) is the only trade body that represents global vehicle manufacturers through their locally appointed franchise holders (commonly called ‘Local agents/ Distributors’). CMTA is affiliated to the Ceylon Chamber of Commerce and is the most senior automotive trade association in the region. The members of the CMTA while bringing in international best practices in engineering and management, collectively employ and train thousands of Sri Lankan citizens, developing a talent pool that is trained and employable internationally. (Colombo Gazette)

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