Indian cars hit political bump in Lanka

‘Rebuilding export market depends on who assumes power in the island country, upcoming budget’

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Photo : Bijoy Ghosh

The recent political turmoil in Sri Lanka is proving to be a hurdle for the Indian automobile industry, which has been in discussions with the government there to rebuild the market as an attractive export destination.

Sri Lanka, which was among the largest export markets for vehicle manufacturers in 2011-12, has seen demand for India made cars fall sharply, following certain policy decisions that made it impossible for Indian automakers to remain competitive.

‘$1 bn exports’

“At some point we used to sell almost $1 billion worth of cars to Sri Lanka. This came down to $300 million about three to four years ago. In 2017-18, it stood at just $36 million. So, the market has totally been wiped out,” Sugato Sen, deputy director at the Society of Indian Automobile Manufacturers (SIAM), said.

SIAM had sent a delegation to Sri Lanka recently to discuss the issues hampering exports to the country.

“The delegation met a number of officials from the Sri Lankan government. We got a very positive response from them. They assured us that the issues will be taken care of… now we don’t know what will happen,” Mr. Sen said.

Wait and watch

With the political crisis in the island country now, the industry is in a wait-and-watch mode to see “which government finally comes to power and what happens in the upcoming budget…We were expecting that a lot of things will be addressed in the budget.”

Some of the issues that were discussed included free import of used cars in Sri Lanka, which has resulted in the demand for new cars wiped out and higher duties that give edge to vehicles coming in from Japan.

Mr. Sen said the industry was seeing the Indian government’s cooperation as well. The meeting with Sri Lankan officials also saw representations from the Government of India.

“They discussed automobiles under the Economic and Technology Cooperation Agreement (ETCA) agreement ... Also, a paper on automobile MRA [Mutual Recognition Agreement] was introduced and will be further discussed in the future,” Mr. Sen said.

The Sri Lankan car market has grown more than 50% from nearly 5 lakh units in 2012 to more than 7.56 lakh units in 2017, as per the website of that country’s ministry of transport and civil aviation.