Grey imports from Britain disrupt the luxury car market in Sri Lanka
Prestige car company directors Ranjith Jayawardena, said independent loopholes in luxury car importers are taking advantage of duty, will be in a cold climate in the production of the new model of tax by half, classified as a used car, to preempt the manufacturer designated dealers of the market. BMW’s local dealers. The customs values a used car at the manufacturer’s sales price and discounts 15% of the basic vehicle. Independent importers or grey importers purchase new cars in the UK and register and unregister them there, thereby qualifying as a used car to get a discount. Authorized dealers can’t do this because car manufacturers appoint them to sell new cars.
Grey importers enjoy another benefit. Since import duties are calculated on basic vehicles, the additional specifications and options issued by the manufacturer will raise the final invoice price by 30 per cent or more, thus excluding valuation. On the other hand, authorized dealers are taxed at a higher invoice value.
“We are losing business because we can’t match the prices offered by grey importers. They sell new cars at a discount, and margins are still higher than we are, “Jayawardena said.
In 2012, prestige cars accounted for 96% of BMW’s imports to Sri Lanka. By 2016, its share had fallen to less than 29%. Independent importers now dominate the market. “Most of them are new cars. We know this when we enter the chassis number of the BMW database; Most of them are only a year old, “Jayawardena said.
BMW X5 M Sport is the most popular BMW model in Sri Lanka. The SUV has a speed of 200km/h and its 2 litre engine and 230 kw plug-in battery have a power output of 313 horsepower. Jayawardena said, “this is a monster.
Basic models are equipped with advanced leather seats, mocha Dakota leather seating, driving seat memory, high gloss shadow line exteriors and roof rail, stopping distance control, with a shift to dial in the automatic transmission and pneumatic body shapes. The manufacturer priced it at 10 million rupees.
Luxury suvs often meet customer requirements perfectly, and the basic price is up 30%. Exquisite wooden interior decorations, night vision and dynamic light that can be remotely detected people and animals, adaptive LED headlights, senior audio system, rear seat entertainment screen, a panoramic glass sunroof, ceramic veneer control panel, soft shut the door and a series of options can be to increase the sales price to about 13 million rupees. A 20 per cent VAT raises the price of the sale to 15 million rupees, which is the value of the 104% tax levied by the customs. This will allow the total cost of BMW to import BMW X5 M to 31 million rupees. Allowing a reasonable profit of 2 million rupees, dealers must sell at least 33 million pesos.
However, a separate car importers can import the same specifications of the car, the price is less than 23 million rupees, and there is enough space to make a profit, and weakened the authorized dealer price.
They can sell the same SUV here, below the prestige car of 6m rupees, still four times as much as the deal. This is because independent importers classify these imports as used cars. Therefore, the customs will deduct 15% from the basic price and impose a tax of 104% on 8.5 million rupees. The VAT and the additional options are not taxed.
Who wouldn’t get around an authorized dealer to buy that dream car much cheaper? Jayawardena warned: “people think they are buying a fully functional new car, but they are quickly disappointed because it doesn’t make any sense to Sri Lanka.
German automaker Bayerische Motoren Werke; Established in 1916) and other car manufacturers to produce vehicles specific to different market conditions. In Europe, car makers are enjoying tax breaks for installing engines that meet the euro 6 emissions standard. These engines won’t last in a market like Sri Lanka that has low fuel quality, which is why BMW has a special engine here.
In addition, plug-in batteries and other electrical components are programmed to withstand high temperatures for cars made in the area. The X5’s front grill is less imported from Britain. Sri Lanka has a larger model, breathing in more air to cool its engines and systems.
The problem began when British cars hit the road in Sri Lanka. Damaged by heat, BMW X5’s 100kg battery eventually became a heavyweight. Hybrid cars run separately on internal combustion engines. “You can do it for a while, but you won’t get a good BMW experience. You don’t feel monsters either, “Jayawardena said.
Soon, low quality fuel will be paid for. In the UK market, engine impacts and delays are common in projectors.
After China, Sri Lanka was BMW’s second largest grey import market and had the most complaints due to the surge in grey imports. This hurts the image of luxury brands.
The authorized dealers here have the necessary systems, spare parts and technology to repair, but they refuse to contact the grey imports that block future imports. Each component is connected electronically, and only authorized dealers can access the manufacturer’s system to run the diagnostics. “Roadside mechanics can’t handle small problems because they can’t get into the car’s system,” he said.
Prestige cars charge 3 million rupees to register gray BMW imports as long as it is a used car. “We can check the manufacturing date of our system. “We rarely find that we actually import used cars,” Jayawardena said. Replacing the batteries could cost about rs3 million, and BMW will not be covered by grey import guarantees.
When people buy cars from independent car dealers, people rarely talk about cars. They continue to drive their underperforming bims with pure prestige, or put them in the first opportunity. As a result, BMW’s secondary market has collapsed, and the brand is winning its reputation with unreliable brands.
Existing customers who pay a premium are also hurt. Because of the cautious second-hand market now, they cannot sell their cars to finance the upgrade. To solve this problem, the prestige car introduced an old new scheme and a second-hand car rental service. “We have to restore the secondary market. The luxury car market is growing, so we need to protect brands to attract new buyers and keep repeat customers. “Jayawardena said.
The sri lankan customs USES two ways to calculate the import duty of cars in two ways. One approach is to apply tax rates on the CIF value (or the invoicing value of the manufacturer). The second approach is based on engine capacity.
Compared with Japanese brands, European models have smaller engines but more powerful ones, and are taxed on a CIF basis because they are expensive. Japanese cars are often taxed because of the capacity of their engines, because they are bigger and more powerful. The price of a Japanese suv is low, but its engine capacity is high, making it easy to market luxury models such as BMW X5.
Diesel and gasoline hybrid diesel and gasoline, CIF value between 1000 to 2000 cc (or each engine capacity unit Rs2, 000 and the Rs4, 000) between a 104% tax rate, engine capacity over the range of plug-in a 173% or 230% of the invoice value or the ability of each engine unit 5000-6000 rupees.
BMW X5 sits at a lower tax rate and “is the most popular BMW model imported to Sri Lanka. That is why grey importers have chosen this model. “Jayawardena said. He described it as a lucrative, booming “bungalow”. “All they have to do is sell a BMW and make a profit of more than 4 million rupees,” he said.
The government needs to plug the hole in the import tax code. Arbitrage is not illegal, but in this case, luxury car imports lose up to 50 per cent of the tax. Although grey imports do benefit consumers, this is not one of them. This is bad for everyone except for grey importers