Motor traders cry foul over new EV import relief benefiting single company
Sri Lanka’s motor traders have raised serious concerns on the government’s decision to impose a zero customs tariff on the CIF value to import electric vehicles with power up to 500 kW or Plugin Hybrid Electric Vehicles (PEHV) up to 3000CC in semi-knockdown (SKD) form for local assembly.
This was proposed in a cabinet memorandum submitted by the Ministry of Investment Promotion and in addition to it, a proposal has been made to grant this facility for a minimum investment of US$50 million by companies with the approval of Board of Investment (BOI) or new companies entering into such agreements.
As per the Standard Operating Procedure of this Ministry, companies or industries assembling / manufacturing vehicles should add at least 20 per cent local value addition, but no such requirement is needed on these vehicles in the first two years.
This move has been made by the government authorities with some ulterior motives for the benefit of a leading company in vehicle import and assembly business in Sri Lanka, frontline members of the Vehicle Importers Association of Sri Lanka (VIASL) alleged.
Amidst protests of motor traders, the Ministry of Industries convened a hurriedlyarranged special meeting with representatives of automobile manufacturing and assembling sector on Thursday stating that it has to send the observations on this matter to the cabinet on or before Friday September 22.
Representatives of the industry including brand new vehicle importing and assembling companies who participated at this meeting expressed their views explaining the negative impact to the consumer, environment, society, and the economy.
Most of them were of the view that this will lead to used electric vehicle imports and parts in knock down form (CKD) despite the temporary suspension of all vehicle imports.
They noted that this cabinet memorandum violates the guidelines of the Industry Ministry’s Standard Operating Procedure (SOP) for local assembly of vehicles and automotive component manufacturing,
Addressing a media conference in Colombo on Thursday, VIASL secretary Arosha Rodrigo alleged that this proposal is devised to benefit a single company (Senok Automobile Assembly Pvt LTD) which is believed to have fulfilled these requirements in 2021. Officials of this company could not be reached for a response.
This was clearly indicated in the Cabinet Paper (MIP/CP/25/2023) under the title Vehicle Assembly Plant Project at Kuliyapitiya by Western Automobile Assembly (Pvt) Ltd (Initially known as Senok Automobile Assembly (Pvt) Ltd.) which has signed an agreement with the Board of Investments (BoI) on August 13, 2015.
The cabinet approval was given to the company to assemble diesel vehicles of engine capacity from 1,000cc to 2,000cc using imported brandnew SKD units provided by technical collaborator, Volkswagen AG of Germany, with an envisaged investment of US$ 26.5 million as a local investment.
In 2021 this company has fulfilled the requirement of $50 million and if the new cabinet proposal is passed then Senok will be the sole benefactor, he complained.
According to the Cabinet Paper, the company had requested the BoI to implement an allinclusive zero per cent (0%) flat tariff on CIF value instead of the existing 30 per cent tariff for the import of brand new SKD kits for the assembly of electric vehicles, PEHVs and electric two-wheelers.
All these requirements were included in the cabinet memorandum and it is benefiting this company but not the others he added,
If this proposal is approved by the cabinet, it will exert a serious impact on the economy affecting foreign currency reserve due to foreign exchange out flows for imports, he added.