Team-BHP - Indian car exports face excise duty hurdle in Sri Lanka

Quote:

New Delhi: Indian auto companies, facing the prospect of a slowdown in their home market, are also seeing an export market that accounts for around 13% of their exports dry up after Sri Lanka effected a steep increase in indirect levies that will make it all but impossible for them to remain competitive.

The move, which dates back to early November but is just coming to light, doesn’t single Indian firms out, but affects them the most because they account for 95% of the auto market in the island nation.

Through 2012, Sri Lanka has made it difficult for Indian auto exporters, first by increasing import duty significantly in April, and following up with the increase in excise duty.

http://www.livemint.com/Industry/jmN...Sri-Lanka.html

That's a $800 million per year hit!

I guess the Sri Lankan Government wants to encourage Indian manufacturers to setup an assembly line in their country (& hence contribute their bit to the economy), rather than just exporting fully built cars.

We have to read it along with the news that SL government has supposedly cleared a Chinese assembly plant in Hambantota. Then the picture becomes more clear; or murky, depending on your level of cynicism.

There:
http://www.sundaytimes.lk/121118/new...bed-21137.html

Who are we to complain? We do the same for car imports from other countries (CBU/CKD). Our local manufacturers don't like Indian govt reducing import duties from EU.

Since the most affected class of car seems to be sub-1000cc, I guess Maruti, for instance, could put a 1000+cc engine in the car and still price it competitively (I'm thinking something like the old Alto VX 1.1).

If I'm not wrong, most of the imports from Japan are used cars. As I understand, there is a huge lobby for this. Toyotas of Japan know that there is a market for their new cars when there is a market where the used cars can be sold. I've seen the photograph of CEO of Toyota with the PM of Bangladesh in one of the 5 star hotels in Dhaka (Bangladesh is somewhat similar to SL wrt to used car imports from Japan).

So, Indian manufacturers need to lobby for duty reduction. I don't know if the volumes make sense to setup up manufacturing/assembling plat. I heard from locals that either Tata or Ashok Leyland as an assembling plant somewhere in SL.

Regarding the Chinese assembly plant coming up in Hambantota, it may be one of those over-ambitious projects of the President. Hambantota is his home town. Locals talk of a lot of lofty projects in Hambantota, including a 7 star hotel by Kingfisher! (don't know how far it is true).

What is interesting is that the press in Sri Lanka doesn't seem to have taken kindly to this hike in import duty and indirect levies. They're openly critical about the policy which is a clear reflection of their displeasure.

It does seem like a move motivated toward stamping out Indian auto exports from SL's market considering we account for 95% share. On the other hand, the exemptions to cars coming from Japan are inexplicable and puts a question mark on the overall fairness and all rounded-ness of this decision. Anyway it is sure to give the Japanese a slight edge in the same.

Just imagine the cheapest small car in Sri Lanka i.e. the 800 going up by SL Rs. 2 Lacs. It is sure to dent the aspirations of the SL middle class who would've otherwise bought the 800 blindly as their first car.

Maruti weighing car assembly in Sri Lanka as import duties soar

Quote:

New Delhi: Maruti Suzuki is planning to set up a car assembly plant in Sri Lanka with a local partner, marking its first step outside the country. The move was prompted by the Sri Lankan government’s recent attempt to promote local manufacturing with tighter import norms and higher customs duty. Maruti wants to consolidate its considerable market share in the island nation with a local plant.

Quote:

Mumbai-based utility vehicle major Mahindra & Mahindra is also reportedly talking to its Sri Lankan partner, Ideal Group, to set up a local assembly plant at an investment of Rs 11 crore.

http://www.financialexpress.com/news...soar/1043930/0

Countermeasures being contemplated.