An urgent independent regulatory body should be set up to monitor the sales and other activities of the automobile industry in Sri Lanka, says the Institute of Automotive and Machinery Valuers Lanka. (IAMV)
“In 2021, we experienced an unexpected huge hike of second hand vehicle prices and automotive machinery, which shot up by almost 70%,” recalled Director/President IAMV, Isuru Senaratne. This happened because of the temporary vehicle import ban enforced by the government. It created a vehicle market bubble, which definitely had a negative impact on the financial sector and overall economy. Even though as a professional body we had predicted that this would happen, no action was taken by authorities to manage this huge vehicle price rise. Now we’refacing the adverse effects of that.
“Furthermore, this isn’t a realistic market situation. There are some factors or variables that we, as professional valuers, have identified, which affect the overall prices of vehicles and machinery.”
These include, a) Instead of transactions ending with end-users, most transactions happened with intermediate parties. b) Buyers were offered short-term loan schemes, creating more demand. c) Buyers had a limited time period for making decisions. d) Condemned and unusable vehicles entered the market due to high demand. e) Less popular vehicles with inherent faults also gained attractive value in the market. f) Unethical and fake advertising systems misled buyers. g) New, inexperienced individuals entered the vehicle buying and selling business, creating an uneven market price and competition. h) Long-established business people who had invested heavily in the industry lost their businesses. i) Some unprofessional valuers followed artificially created unrealistic markets without making accurate judgments. All these interrelated factors contributed to market growth. However, a few months later, the situation gradually declined, impacting the financial sector.
Following were the adverse effects that we faced: a) Financial facilities given at high exposure. b) Insurers and insurance companies experience a lot of settlement problems due to the drop in market value. c) An Extra amount of our currency had to be paid in proportion to the increased
overall sum insured for insured vehicle population. d) People who invested large amounts in income-generating assets face significant losses due to economic downturns. “Considering the current market behavior, after a long time, we are seeing a gradual increase, but it’s not stable. If ignored this could lead once again to dangerous issues and there’s a probability of facing economic losses. As Valuers, we have a special responsibility not to follow artificial markets but to concentrate on the realistic market and provide afair economic value.
“This is why we recognize the need for a regulatory body to safeguard the public, the financial sector and traders.” Malpractices in the valuation industry, such as online valuations and unethical valuations by inexperienced officers, have already been declared illegal by the Central Bank of Sri Lanka.
“When purchasing a vehicle, one should be more careful and identify important factors and financial companies should pay more attention to reviewing their credit criteria and maintaining a qualified, independent valuation panel.
