Citing safety concerns and traffic jams where the use of Indian three wheelers are concerned, and the growing number of trishaws already plying on its roads, government of Sri Lanka plans to restrict import of Indian three wheelers into the country.
As expected, if this is implemented,it impacts exports of Indian three wheelers. 14 percent of overall exports of Indian three wheelers head to Sri Lanka. However, it won’t impact the domestic industry largely says ICRA owing to domestic tailwinds and improved performance in some export markets. Add to this, dependency on Sri Lankan market has been offset with business opportunities in African and Latin American markets.
Rickshaw Run 2015
Subrata Ray, Sr. Group Vice President, Corporate Sector ratings, ICRA says “The opening up of 3W market in key states along with replacement-driven demand is likely to drive healthy sales in the near-term, which will help offset the adverse impact of Sri Lanka’s potential restrictions. Furthermore, on the exports front, as Sri Lanka’s share in overall exports pie has reduced from 30% (in FY 2016) to 14% (in FY 2017), countries such as Nigeria and Egypt have emerged as bigger export markets for Indian OEMs.”
The domestic market reported contracted demand, down 5 percent in FY 2017, but that’s looking like a thing of the past now. With cap on permits is Maharashtra and Gujarat lifted, release of fresh permits by Delhi, and replacement demand in Karnataka after an order to convert all vehicles to four stroke engine and ban diesel vehicles in Bengaluru, domestic demand has recovered. In September 2017, highest domestic sales of three wheelers was reported with 61,680 units sold.
Indian three wheelers stood at 272,000 units in FY 2017. For a decade until FY 2016, 3W exports grew at a CAGR of 12% (in unit sales) to plug the gap in last mile connectivity in nations where public transport systems don’t address such needs.
Ray added, “Going forward, continuing political and economic challenges in some of the key importing nations, which were accompanied by sharp currency devaluation and often the inability to repatriate currency, may pose some concerns for 3W OEMs. However the overall outlook appears positive as domestic sales have started inching upwards, over 15% growth in H1FY 2018, driven by pent-up demand and opening up of permits in select states and; a 19% growth in 3W exports in H1 FY 2018 driven by rise in sales to Bangladesh and Egypt.”
Transport Minister, Nirmal Siripala de Silva has revealed that Sri Lanka has over 1.2 million three wheelers, called trishaws, plying on its roads. These three wheelers are mostly supplied by India’s Bajaj Auto Limited and are popular among young drivers in the country. However, due to increased number of accidents, there is an urgent public demand to stop their import or to offer driving licenses to those drivers above 35 years of age.
Taking into account accidents only in the Sri Lankan capital of Colombo, 85 trishaw drivers were killed in the first 7 months of last year and 124 passengers were also killed in the same period. Citing these safety concerns, the Transport Ministry is restricting import of three wheelers into the country which could have a direct impact on India’s exports. However, the extent of impact is not expected to be so great specially since Sri Lankan exports had reduced from 30 percent in FY16 to 14 percent in 2017 but exports to countries like Nigeria and Egypt had increased substantially. India’s three wheeler global exports stood at 2,72,000 units in FY17. Three wheeler OEMs in India have been paying more attention to African and Latin American markets and it will be these exports that will offset the impact of Sri Lankan restrictions on three wheelers.