Indian truck makers face Chinese Competion in Sri Lanka


Ashok Leyland's volumes in Lanka have fallen by over two-thirds to about 2,200 units in fiscal 2013.
Ashok Leyland’s volumes in Lanka have fallen by over two-thirds to about 2,200 units in fiscal 2013.

 

Official data in 2010 showed China was Sri Lanka’s biggest lender, with loans amounting to $821 million. China has been pumping in millions of dollars (the plan in 2010 was an investment of $1.5 billion over three years) into Sri Lanka to develop infrastructure such as roads, bridges, power and ports. Recently, China has signed an agreement to provide a further $2.2 billion in loans toward infrastructure to Lanka. India, on the other hand, has been one of the top-most providers of foreign direct investment (it did $110 million in 2010).
lanka and china
The issue of China’s interest in Sri Lanka’seconomy, that too in core sectors, has been a sensitive issue in India.

It is Chinese truck-makers such as Foton, JMC and FAW who have managed to grow their market share in a difficult period. Foton, for instance has doubled its monthly volumes in two years – increasing its share from 4.9% to 7.4% in light trucks market in the process. Chinese players now have a 20% share in this segment, from barely 5% two years back.

What more, the Chinese players could smell an opportunity here. Vijay Kakade, director at Automotive & Transportation Practice,Frost and Sullivan, said, “India always holds a strategic position with Sri Lanka. However, lately, huge investments were made by Chinese majors in Sri Lanka which has facilitated them in drawing Sri Lankan governments as well consumers’ attention. In our opinion, in the longer run it will also help in generating further preference towards Chinese products as compared to offerings of Indian majors.”

Kumar Kandaswami, senior director at Deloitte Touche Tohmatsu India, agreed. “China and Sri Lanka seem to have a good relationship at the governmental level and that would play a part in the markets being opened.”

However, Murtaza Jafferjee, managing director at Colombo-based brokerage firm JB Securities, refused to buy the argument. On the contrary, he blamed the economic slowdown in Sri Lanka and higher borrowing cost. “Also there was lot of repossessed vehicles on sale, which brought down the new vehicle sales. Indian brands will still continue to dominate the medium and heavy trucks market here.”

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