Car imports: go electric now | Sunday Observer

Car imports: go electric now

27 August, 2023

One of the first steps that the previous Government took in the wake of the Covid-19 pandemic was completely curtailing vehicle imports to save foreign exchange.

This was a prudent decision at that time, as vehicle imports alone cost a massive US$ 1.5 billion on average per year. This is a substantial saving, given that our foreign reserves had dwindled to an all-time low.

But with the passage of almost five years and the economy recovering to a great extent, there is once again a pent-up demand for brand new vehicles in the country.

Although there are two or three companies that assemble cars locally, many people yearn for a greater choice.

However, there is simply no way that we can go back to a ‘free for all’ model for car imports, where almost anyone could import a car with the correct paperwork. This is indeed how so-called ‘car sales’ blossomed in every nook and corner. Our finances do not allow such an arrangement right now.

Conversely, we cannot be permanently ‘closed off’ to all imports including cars, according to World Trade Organisation (WTO) Regulations, which we have adhered to in principle. Thus at some point in the near future, we have to commence car imports on a limited scale, without opening the floodgates per se. There are many ways in which this can be done, but our decision makers must work on it from now on.

The Government has now decided to permit the import of passenger buses and trucks, which keep the economy moving. This we hope will be the first step in the liberalisation of vehicle imports.

But when it comes to private passenger cars, only pure electric ones should be permitted henceforth. A previous Government actually reduced import and excise duties on electric cars, but that Government itself reversed this decision in a clear case of twisted logic.

Had that decision remained in effect, we would have had at least 10,000 electric cars on the road by now, thereby alleviating the pressure on the oil import bill (US$ 5 billion a year) to some extent.

Now is the correct time to allow the import of electrics at least on a limited scale, as every major manufacturer has at least one all-electric car in their line-up for Model Year 2024.

Concessions and incentives should be granted for the purchase of electric vehicles, within the constraints imposed by our economy. If we do not take this step, the electric revolution could pass us by.

The authorities should also negotiate with an electric car manufacturer such as Tesla or Lucid to install DC Rapid Superchargers in selected locations throughout the island. If more DC Chargers are available, people will be inclined to buy electric cars. Buyers should also be encouraged to install solar chargers, for which import duties can be reduced.

The entire Government fleet must eventually be converted to electric and all new purchases must essentially be electric.

Converting the Government fleet will accelerate Sri Lanka’s decision to only allow the registration of electric (and possibly hydrogen fuel cell-powered) vehicles from 2035 onwards.

Only the accredited local sole agents of vehicle manufacturers must be allowed to import electric vehicles and any other type of vehicle. The ‘car sale’ sector led to a massive drain on foreign exchange as they collectively imported thousands of cars, some of which are still waiting for buyers.

The import of ‘reconditioned’ vehicles must not be allowed. The import of used electric cars must be discouraged, as there is no guarantee about the actual condition of the battery. The Government has to formulate standards for the repair and disposal of electric car batteries before allowing the import of electric cars in greater numbers.

Sri Lanka might be able to follow the Singapore model for car imports. Singapore severely restricts car imports due to its limited size and road network through a system called the ‘Certificate of Entitlement (COE)’. To register a vehicle in Singapore, the buyer must first place a bid for a COE in the corresponding vehicle category.

A successful COE bid gives the holder the right to own a vehicle that can be used on the road for 10 years. COEs are released through open bidding exercises conducted twice a month.

The COE amount is almost always higher than the actual CIF price of the vehicle itself, so would-be buyers think twice before bidding. This system has helped to curb the number of vehicles in Singapore to a great extent.

Finally, it is vital to build a comfortable, clean, fast and punctual public transport system to discourage car purchases and usage.

The cancellation of the Colombo-Malabe Light Rail Transit (LRT) project by the previous administration was a monumental mistake and we hope this Government will put things right. Indeed, the Government’s primary goal must be having a good public transport system so that the need for a private car will not arise in the first place.