Sri Lanka’s DIMO ventures into assembling of vehicles following vehicle import ban
Sri Lanka’s Diesel and Motor Engineering PLC (DIMO) has reportedly decided to venture into the assembly of vehicles following the decision of the government of Sri Lanka to restrict vehicle imports to the country.
“The current Government policy with regard to vehicle imports led us to consider the option of assembling vehicles in Sri Lanka. We have obtained the necessary approvals to perform a vehicle assembly operation on a semi-knock-down (SKD) basis, and the service will be available in the market soon,” DIMO Chairman Ranjith Pandithage has been quoted as saying.
The assembly operation is to be carried out at DIMO’s premises in Weliweriya, Pandithage has stated in the Company’s Annual Report for FY21.
He has further noted in the report that a restriction on the import of passenger and commercial vehicles came into effect in May 2020, effectively closing the doors to the new vehicle sales business.
For DIMO, FY21 was one of the toughest years for the motor segment with a nationwide decline of 45% in new registrations of motor vehicles during 2020/21, according to local media reports.
In FY21, the vehicles sales segment’s pre-tax profit had reportedly suffered a 48% decline to Rs. 340 million whilst turnover declined by Rs. 7.3 billion or 53% to Rs. 6.4 billion.
The brand had also prevented the new models of DIMO’s flagship brands from being introduced in Sri Lanka whilst sales of Mercedes vehicles imported up to the time of the import ban in May 2020 and pre-owned DIMO certified vehicle sales were the main contributors to the segment.
The import of spare parts had also come under increased regulation with supplier credit stipulations imposed for several spare part categories.
According to reports, in response to the changed regulatory environment, DIMO in FY21 has re-organised the vehicle sales team assigning them to the pre-owned vehicle sales business and has simultaneously actioned plans to harness the potential of after-sales businesses, including spare parts, the success of which is evident in the year-end results of the vehicle after-services business, Pandithage has noted.
The vehicles after-service segment had reportedly recorded year-to-year growth of 11%, contributing 31% to the group’s segment results.
DIMO has stated that efforts to increase bay utilisation and vehicle service times, as well as marketing investments to stimulate market pull for vehicle spare parts, had contributed to the segment’s growth. Revenue from the vehicle parts business had recorded a 26% increase in FY21.
Notwithstanding the hit from the motor business, thanks to counter and progressive strategies, including timely diversification, DIMO had reportedly ended FY21 on a positive note.
Chairman Pandithage has stated that from its inception, DIMO has been involved in the business of vehicle imports, which has been the company’s dominant business.
“The restrictions on vehicle imports affected this dominance and adversely impacted our revenues, which we were able to overcome owing to our previously planned strategy of securing revenue from other sources. With considerable contributions from other business segments, the group was eventually able to achieve the planned results. Considering the historical dominance of DIMO’s automobile sector, this is a milestone change in our history with potential for exponential growth,” he has been quoted as saying.
The decision by DIMO Sri Lanka to venture into vehicle assembly is indicative of the expanding business potential in the country. With Sri Lanka banning the importing of vehicles, there has been a new business opportunity in the sector of assembling vehicles. Sri Lanka’s economy has shown great resilience through the years and is once again on the path to recovery after facing the impact of the global Covid 19 pandemic. The profits recorded by Sri Lanka’s private sector even amidst the Covid pandemic is indicative of the strength, growth and business potential in the country’s private sector.
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