The Ceylon Motor Traders Association (CMTA) voiced its concern over the new Standard Operations Procedure (SOP) proposed by the Ministry of Industries on local assembly and local value addition of motor vehicles.
The CMTA points out key areas of concern in the backdrop of the SOP to be launched this month, first of which is that this policy was created without input from global automotive manufacturers through theCMTA, whose experience and insight will result in a more viable SOP, which will facilitate the sustainable success of the assembly industry.
Chairman of CMTA, Yasendra Amerasinghe said, “We applaud the government’s initiative to promote local assembly of vehicles in Sri Lanka and extend our full support in this regard. However, for such a key policy, which has a significant impact on the automotive industry as well as supporting industries such as finance and insurance, we believe it is imperative to obtain input from a cross section of the industry when creating the policy framework.
“We regret to note that only companies who were already carrying out local assembly had been invited to give input. Had the CMTA been invited to participate and provide industry input, the Government would have obtained a far broader insight from brands which are potentially interested in assembly as well as those who are already engaged in it. We urge the Government to involve global manufacturers through their appointed local franchise holders to obtain policy making input in future to ensure the greatest practicality and success of these policies.
“Having perused the proposed SOP, CMTA members have voiced concerns on several areas, which are either ambiguous or impractical. The goal of the CMTA is to advocate the greatest success of the vision for local assembly, which means attracting reputed international automobile brands and facilitating their entry to the market.
“These concerns have been forwarded to the Minister of Industries and State Minister of Transport for the betterment of the automotive industry,” he said.
The CMTA points out the fact that the domestic value addition for 4-wheelers which is proposed as 20% and for 2-wheelers as 25% is a hurdle for new brands to enter the market due to the current scarcity of locally manufactured components which will meet the standards of reputed manufacturers. Reputed vehicle brands will not allow any component which does not meet their quality standards to be fitted to their vehicles as they are extremely rigorous on consumer safety and product quality.
The proposed SOP requires that at least 50% of raw materials for locally manufactured components must be sourced locally, which is completely impractical due to the lack of raw materials in Sri Lanka to meet this need.
The CMTA expressed concern that the current requirements of the SOP will lead to a situation where only unknown brands with lax standards are able to be assembled in the country leading to consumers having access to vehicles of low quality and safety levels. The Association also voiced alarm that by restricting potential entry of reputed brands of vehicles and components to Sri Lanka, it will lead to a monopoly situation, which is detrimental for consumers, the industry, and the country.
The CMTA urges the Government to take the measures to develop the vehicle component manufacturing ecosystem,which is still at its infancy. As can be witnessed in any country that has successfully implemented local assembly, such as India, Vietnam, Malaysia, etc, a vibrant and high-quality ecosystem of component manufacturers is vital for the success of vehicle assembly. Although the proposed SOP had thus far been drafted without the contribution of the broader automotive industry, the CMTA calls on the Ministry of Industries and other stakeholders to collaborate with reputed global manufacturers through their appointed franchise holders in future to ensure the success of vehicle assembly in Sri Lanka.