Duty changes hit growth in Maruti’s exports to Sri Lanka

1420547656-2206Maruti Suzuki’s exports to Sri Lanka, the biggest foreign market for it last year, are losing pace, thanks to an increase in import duty by the island nation. Last year, Sri Lanka had overtaken markets like Chile and the Philippines to become the top export destination for Maruti. This was after a reduction in duty by the government of that country had stimulated demand, of which India had emerged the biggest beneficiary.

“The pent-up demand, following a duty relaxation last year, has been served. There also was advancement of purchase, and market growth in Sri Lanka was abnormally high. After the reversal of import duty, the short-term surge in demand ended,” said a Maruti Suzuki spokesperson. As new imports would become expensive, sales had dropped and were expected to normalise shortly, the spokesperson added. India’s largest car maker, Maruti, is the second-largest exporter of passenger vehicles from India; Hyundai is the largest.

Models like the Alto and Celerio are in high demand in Sri Lanka. Maruti’s export volumes to that country have fluctuated with the changes in taxation structure. In 2011-12, Sri Lanka was its largest export market. The company has a distributor in Sri Lanka that operates through a network of over 20 retail sales outlets and 15 workshops across the Sri Lankan territory. Maruti also trains the service staff as part of its exports focus. In the past, the company had also contemplated setting up an assembly unit in that country.

In the passenger vehicle export market, often a weak demand in some countries is offset by a surge in demand in others. Economic and political changes are the usual causes of such fluctuations in sales numbers. Changes in regulations also impact the exports numbers.

Expansion of export portfolio with addition of models like the Ciaz, Ertiga, DZire and Swift led to a five per cent increase in export volumes of Maruti in the April-December period of 2015 to 96,841 units. The company is now gearing up to ship its latest hatchback Baleno to various destinations. (Courtesy Business Standard)