Sri Lanka Gaining In Importance For Indian Auto Companies

Sri Lanka has been increasingly growing in importance for Indian automobile manufacturers. Companies like Maruti Suzuki India Limited (MSIL) and Bajaj Auto Limited (BAL) depend on the country for a significant amount of their exports. While 5 per cent of MSIL’s export sales come from Sri Lanka, Asia and the Middle East account for about 40 per cent of BAL’s 1.58 million units’ exports, most of it coming from Sri Lanka and Bangladesh. Moreover BAL’s 60 per cent market share in two-wheelers, Mahindra & Mahindra’s (M&M) 20 per cent market share in tractors and the strong presence of MSIL and Tata Motors makes the Sri Lankan market a very important one.

Among two-wheeler manufacturing companies, BAL is extremely export-oriented with 33.95 per cent of its total sales coming in from exports even as companies like Hero Motors and M&M are gearing up to set foot in these opportunity-filled markets. What these markets offer beyond opportunity is stability. A classic example would be that of the sales volume figures of BAL for the month of August 2012. In the month under review, the company’s YoY growth for domestic sales was a mere 5.79 per cent, affected by the automobile slowdown in India but the overall growth for BAL came in at 16.10 per cent, supported by the robust 40.22 per cent growth in exports.

Hero Motors, which has been playing solo after parting ways with Honda, introduced its new brand identity last year and now the company has launched this in Sri Lanka. It has appointed the ABANS Group as the company’s sole distributor. Hero launched 14 models in its product portfolio and plans to channel these through 50 outlets in Sri Lanka. On similar lines, M&M announced three days ago that they would expand into Sri Lanka and start with the sale of two-wheelers by the end of 2012, introducing the company’s automatic scooter range that currently comprises three products.

The company also stated that they plan to launch themselves in the country across a wider spectrum, including financing, hospitality, housing and IT. The company recently played sponsor in the Sri Lanka Premier League (SLPL) as a brand-building exercise. Though companies are increasingly weighing Sri Lanka as an important market, recent developments have in fact hampered sales to this region.

To tackle an increasing fiscal deficit, the Government of Sri Lanka increased import duties on cars from 120-291 per cent to 200-350 per cent, on three-wheelers from 51-61 per cent to 100 per cent and on two-wheelers from 61 per cent to 100 per cent. This increase in duty though has been translated into a price rise by companies since the announcement. For now, sales have slumped because of the price sensitivity of the market but the demand is expected to pick up soon.