New valuation to see rise in vehicle prices

Fizel Jabir jabirfizel@yahoo.com

The new valuation method gazetted by the government which is unrealistic will further jeopardize the Motor Industry and create a vehicle price hike, the industry said.

Vehicle Importer’s Association President (VIAL) and WTM Automobiles Managing Director Sampath Merenchige said the new valuation method will propel Japanese vehicle prices to rise by Rs 1 to 1.2 million. This could lead to the import of Japanese vehicles reducing by almost 90%, he said.

The government recently released a gazette notification introducing a set of new valuation guidelines for new and used vehicles to be imported to the country. The amount of tax will now be determined by the vehicle value declared by the Director General of Customs.

Ideal Motors Chief Executive Officer Chaminda Perera said the ultimate result of this new valuation set up will be the huge reduction of vehicle imports and the purchasing capacity of the people dropping drastically.

He said so far the valuation method was based on the manufacturer’s value (FOB).

“However manufacturers normally take into account the per capita income and many more factors when deciding the prices for different regions. If the authorities consider prices for valuation form high per capita income regions it will be unfair from the part of the customers”, he said.

Perera however said what he understands is that these regulations were meant for more or less for those who undervalue vehicles to evade tax payments. He also said that although the government did announce the relaxing of the loan-to value (LTV) to 90%, the Finance Ministry has not conveyed the decision to the leasing companies officially yet.

Eurocars Assistant Sales Manager Ruston Yusuf said they would not be affected by the new valuation guidelines because they directly import Porsche vehicles from the manufacturer. He however said they have yet to receive the new valuation guidelines for Porsche range of vehicles.

Chery Assistant General Manager Trevene Ferdinand said the new valuation is yet under discussion by the top management and it was too early to make any comment.

“However with the rupee depreciating and new valuation guidelines coming into play, the prices of all their Chery vehicles is likely to increase,” he said.

Customs spokesman Leslie Gamini said the new valuation comes to effect for LOC’s opened for vehicles after September 17. When asked as to how there were huge deviations in the new valuation of some vehicle categories he said he was unable to comment on that but assured that as per the guideline they base the valuation on the manufacturer’s price of the vehicle with the addition of freight and insurance cost.

He said as the Customs, their task was to enforce directives issued by the Finance Ministry. WTL Automobiles Administration Manager,Sunil Ranasinghe said the prices of electric vehicles will however not be affected because electric category does not fall under the purview of the gazette notification.

An official of AMW said the Suzuki Indian vehicle brands will not be affected by the new regulations. However the prices of Suzuki vehicles manufactured in Japan will increase.

Micro Cars Chairman Dr Lawrence Perera said their brands are likely to increase.
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