The Ceylon Chamber of Commerce has released the Motor Vehicle Industry Report 2025/26, marking the return of its flagship publication after six years, as Sri Lanka’s automotive sector enters a new phase with the resumption of imports.

Key findings of the report are: 

• Revenue Contribution: Motor vehicle imports generated Rs. 896.4 billion in customs taxes, underscoring the sector’s importance to government finances.
• Local Assembly Growth: With over 15 local assembly plants and policies mandating at least 20% domestic content, the industry is shifting from pure imports to local value creation and job generation.
• Market Recovery: More than 327,000 new vehicles were registered in just six months of 2026, signaling strong consumer demand and a recovering market.
• Global EV Trends: One in four new cars sold globally is now electric, with EV sales surpassing 20 million units for the first time.
• AI in Automotive: From onboard safety systems to virtual vehicle testing, AI is cutting development times by up to 50%, boosting efficiency and innovation.

The publication provides in‑depth analysis of the role of the motor vehicle industry in Sri Lanka’s economy, recent policy developments, and global automotive trends shaping the future of mobility. 

It includes detailed data on vehicle imports, registrations, fleet composition, and ownership transfers, while also examining market trends across segments such as brand, fuel type, cylinder capacity, and district.

The report further explores industry challenges, emerging opportunities, and the future outlook for Sri Lanka’s automotive sector. It highlights how the industry is adapting to a renewed import environment, shifting consumer preferences, technological advances, and evolving regulations.

The Chamber emphasized that the report is designed as a resource for importers, assemblers, dealers, financial institutions, insurers, policymakers, investors, and other stakeholders, offering data‑driven insights to support informed decision‑making. (Newswire)

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Sri Lanka Customs says vehicle imports have not declined significantly despite the surcharge imposed earlier this year, with imported vehicles continuing to enter the market.

Addressing the media, Customs spokesperson Chandana Punchihewa noted that although a large number of vehicles remain unsold, imports have not dropped as expected, and the slight reduction observed has not had any monetary impact on state revenue.

Chandana Punchihewa explained that vehicle imports contribute around 30 per cent of Customs income. 

He further said that monthly revenue figures reflect this steady contribution: in January, total revenue was Rs. 235 billion, of which Rs. 91 billion came from vehicles; in February, Rs. 215 billion with Rs. 75 billion from vehicles; in March, Rs. 231.9 billion with Rs. 77 billion from vehicles; in April, Rs. 242.9 billion with Rs. 84 billion from vehicles; and in May, up to May 28, Rs. 212 billion with Rs. 76 billion from vehicles.

Chandana Punchihewa added that the rise in the dollar rate, partly due to the Middle East war, has increased the rupee value of Customs taxes, thereby boosting revenue rather than reducing it.

He added that last year vehicle imports accounted for 30–35 per cent of Customs revenue, a trend continuing this year.

“Despite the surcharge, no reduction has been reported as previously expected,” he said. (Newswire)

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Deputy Finance Minister Anil Jayantha Fernando today emphasized that the government has no intention of restricting vehicle imports or allowing the economy to contract.

Fernando explained that the recently announced 50% surcharge on personal vehicle imports was introduced as a temporary measure to ease pressure from the rising dollar rate by postponing imports of personal vehicles for a few months. 

He stressed that the surcharge was not meant to block imports altogether.

The Deputy Minister noted that some consumers had misunderstood the policy, assuming it would automatically lead to a 50% increase in vehicle prices. 

“We have received reports of vehicles being sold at such inflated prices and of buyers paying them due to lack of awareness,” he said.

Fernando underscored that the government’s approach is to manage foreign exchange pressures through fact‑based policy decisions, while discouraging speculation and misinformation that could destabilize both the vehicle market and the wider economy. (Newswire)

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Opposition MP Mujibur Rahman today accused the government of corruption in connection with the President’s announcement of a surcharge on imported vehicles, claiming that politically connected businessmen benefited from advance knowledge of the Gazette.

Rahman told Parliament that on May 15, a day before the surcharge was announced, 1,782 brand-new vehicles opened Letters of Credit (LCs).

“How was it possible for over 1,700 vehicles to open LCs a day before the Gazette was published? Who do these vehicles belong to?” he asked, alleging that the imports were linked to businessmen close to the President.

He charged that the news of the surcharge had leaked, allowing certain car dealership owners close to the President to benefit.

“This is an organized crime. Before the President could publish the Gazette, dealership owners around him had already opened LCs,” Rahman said.

The MP dismissed the Deputy Finance Minister’s denial of reports that 4,000 LCs were opened, insisting that data until the end of May would confirm the figure.

Rahman further argued that the law was being applied unequally, disadvantageous to those importing used vehicles.

“If laws are being initiated regarding vehicles, they should be equal to all. But the law does not apply to certain businessmen. The President says the law is equal to all, but it is not so. Those who supported the President are now benefitting,” he said.

He accused the government of creating what he called a “crony economy”, designed to benefit allies of the President.

“The President has brought laws to benefit those around him and earn as much as they want,” Rahman charged. (Newswire)

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Former Minister Ali Sabry has backed the Government’s decision to impose a 50% surcharge on vehicle imports, describing it as a prudent step to protect Sri Lanka’s fragile external sector amid global instability.

“The Government’s decision to impose a 50% surcharge on the import of vehicles, in the midst of escalating global uncertainty and external pressures, is a prudent and timely measure aimed at protecting Sri Lanka’s fragile external sector and preserving scarce foreign exchange reserves,” Sabry said in a statement on social media. 

He welcomed the exemption for Letters of Credit opened on or before May 15, 2026, calling it a fair safeguard. 

“It avoids unnecessary uncertainty, prevents retrospective complications, and protects already embattled importers from further hardship and arbitrary administrative difficulties. In times of crisis, clarity, consistency, and fairness in implementation are just as important as the policy itself,” he added.

Sabry warned that Sri Lanka’s recovery remains vulnerable to global conflicts that disrupt energy markets, trade routes, supply chains, investor confidence, tourism, and financing conditions.

He stressed that smaller, import‑dependent economies pay a disproportionately heavy price for wars and geopolitical confrontations.

“Ultimately, this is precisely why Sri Lanka and other like‑minded nations must continue to urge all parties involved in conflicts to pursue peaceful negotiations, diplomacy, and resolution through dialogue rather than aggression, escalation, and invasions,” he noted, emphasizing that the economic and human costs of war are borne most painfully by ordinary people in vulnerable nations. (Newswire)

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The Ministry of Finance has announced a new tax measure imposing an additional 50 per cent levy on the existing customs duty for imported vehicles.

Under the decision, the current 30 per cent customs import duty on motor vehicles will be supplemented by a further 50 per cent surcharge. 

The measure was formalized through a special gazette notification issued under the signature of President Anura Kumara Dissanayake.

The new levy takes effect from today (16) and will remain in force for a period of three months.

However, the gazette specifies that vehicles for which letters of credit were opened on or before May 15 will not be subject to the additional 50 per cent duty.

Gazette: https://www.treasury.gov.lk/api/file/b5fee09e-8b6d-419e-9b52-54eb0927979e (Newswire)

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Opposition MP Rohitha Abeygunawardena today questioned the government on the 3% tax that is added when imported vehicles are released from customs within 90 days.

Addressing the Parliament today, he said that the taxes add up to around 45% by the lapse of five months, stating that it places an undue burden on the consumer.

He pointed out issues with vehicles imported under cross-border LCs, which are now languishing at the Hambantota port, and that they incur high demurrages on top of the tax issue

MP Rohitha Abeygunawardena further questioned whether the government intends to make amendments in this regard. 

Responding to the MP, Deputy Minister of Economic Development Nishantha Jayaweera said this surcharge has been imposed on importers with the expectation of retaining foreign exchange within the country.

He further said a large sum of foreign exchange leaves the country when a large stock of vehicles is imported and hoarded in the country. 

“The 3% tax has been imposed in a bid to systematically control this. I have monitored the customs process, and so far it has taken only around 2 weeks for large stocks of imported vehicles to be cleared, and not 45 days as claimed,” he said. (Newswire)

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The Governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe, says vehicle imports are currently declining and that next year is expected to be a normal year for imports, including vehicles.

He pointed out that with the relaxation of import restrictions, the previously high demand has now begun to ease.

The CBSL Governor made the remarks while speaking at a press briefing held yesterday (26) in connection with the final monetary policy review for 2025

“After vehicle imports were opened, in July, there was a sudden increase in the opening of Letters of Credit (LCs), which led to a rise in vehicle imports. But now we see that the LC data is rapidly falling,” he said.

Comparing the data from July, August, and September, he noted that vehicle imports had sharply declined in November and December.

“Vehicle prices, too, in some way, are slowing down in November and December. We see the market stabilizing, with one reason being that demand has reached a certain equilibrium. Going forward, the pent‑up demand has already been absorbed, and now things are stabilizing, with vehicle prices also coming down.”

“Vehicle imports are now balancing. They were higher than we expected at the beginning of the year, especially in July, August, and September. But we think vehicle imports will decline over the next two months,” Dr. Weerasinghe said.

“Motor vehicle imports are now stabilizing. They were slightly higher than we anticipated at the start of the year. Because of the demand in July, a large number of LCs were opened in July, August, and September. Now the number of LCs is falling, and this will be reflected in the coming months. Demand for imports, especially motor vehicles, will decline,” he further explained.

When asked by journalists whether a forecast had been made for vehicle imports next year, he said, “We have not made a forecast for next year yet. We will do so at the next review. At present, we believe the pent‑up demand has already been absorbed. Now it is declining towards a normal level. Next year will be a normal year for imports, including vehicles. It is still too early to predict exact figures. We have some projections for monetary policy work, but a clearer picture will emerge once this year concludes.” (Newswire)

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Chairman of the Vehicle Importers Association of Lanka (VIAL), Indika Sampath Merenchige, says more than 10,000 vehicles remain stuck at Sri Lankan ports due to clearance delays and documentation issues.

He said 8,726 vehicles have been held at ports within 45 days since August 15, while another 751 vehicles have been stuck for over 45 days since February 1, 2025. In addition, about 200 vehicles imported before February 1 this year, remain uncleared at Hambantota Port, according to data obtained from the Hambantota Port administration, he said.

Merenchige noted that Customs officials informed him they cleared 450 entries last Friday (August 15), which translates to about 600–700 vehicles, as each entry may include multiple vehicles.

He added that on August 18, Customs was expected to clear around 500 entries, meaning roughly 2,000 vehicles were being released after delays.

“Despite this, about 5,000 vehicles remain stuck at Customs for the past 45 days, and another 5,000 vehicles are expected to arrive soon,” he said.

Merenchige further warned that officials had indicated they may be forced to request Japanese freight services to halt vehicle shipments to Hambantota Port due to transshipment issues.

According to VIAL’s data, approximately 1,000 vehicles are stuck at Colombo Port, while around 10,000 are held at Hambantota Port.

He cautioned that growing demurrage costs will ultimately burden the public, blaming the crisis on the government’s failure to adopt proper policies, particularly regarding cross-border letters of credit. (Newswire)

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The Parliamentary Committee on Public Accounts (COPA) has been informed that 72% of the projected target for revenue through vehicle imports has been achieved by August this year.

Director General of the Department of Fiscal Policy of the Finance Ministry Kapila Senanayake said that by 05th August, total revenue had reached Rs. 316 billion, 72% of the projected target.

During the last meeting of the COPA, Deputy Secretary of the Treasury A. K. Senevirathne revealed that by 06th August, 1,278 Letters of Credit in USD (LCs) have been opened for 172,292 vehicles, which have been cleared.

Deputy Minister Chathuranga Abeysinghe meanwhile pointed out that revenue can be doubled during the course of the year, reaching 150% of the target.

Senevirathne noted that, based on current trends, revenue could surpass Rs. 450 billion target. (Newswire)

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Raising concerns in Parliament regarding the tax complications arising during vehicle imports, Opposition Leader Sajith Premadasa said that the tax structure is overly complex, designed to fulfill the interests of various parties, which has led to ongoing evasion of import taxes. 

He said both economic experts and the Samagi Jana Balawegaya (SJB) share the view that the absence of a simple and transparent tax system for vehicle imports is causing significant loss of government revenue, creating an imbalanced market competition, and placing undue hardship on consumers.

MP Premadasa made these remarks under Standing Order 27(2), addressing the crisis surrounding vehicle importation.

Emphasizing the need to clarify whether taxes on imported electric vehicles are calculated based on their maximum capacity or their classified capacity, he requested that the criteria and limits used to impose these taxes be presented separately. 

Furthermore, he asked for details on the capacity basis used by companies importing used or new BYD electric vehicles when paying taxes during customs clearance. 

He called for the submission of both the maximum and classified capacities of BYD models like the ATT3 and others imported by the local BYD representative in Sri Lanka. Given the current controversy, he inquired whether investigations have begun to determine the actual capacities of these electric vehicles.

MP Premadasa pointed out that due to the lack of proper policy implementation, the government could lose Rs. 4 to 4.5 million in tax revenue per vehicle. He also sought information on how many vehicles are currently held at customs due to tax-related complications, and whether these vehicles will remain there until a solution is found or if the government has taken any steps to resolve the issue.

He also pointed out that reports suggest attempts are being made to release the detained vehicles by placing bank guarantees equivalent to the tax difference. If any wrongdoing has occurred, he stressed that the lost tax revenue must be recovered.

Urging the government to learn from this issue and revise its vehicle import tax policies, MP Premadasa noted that developed countries have formulas that do not harm their economies, and Sri Lanka should learn from those models and act accordingly. (Newswire)

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Samagi Jana Balawegaya (SJB) Harsha de Silva slammed the government for its recent decision to suspend the clearance of vehicles imported under cross-border Letters of Credit, calling the move impractical.

De Silva was addressing Parliament when he said that hundreds of imported vehicles are now languishing at the Hambantota port, stating that these vehicles are now facing the possibility of re-exports.

“How can they be re-exported? These are irrevocable LCs. What will Trump say? Can we make a deal to revoke an LC of one of the biggest American banks? Don’t talk of impractical solutions,” De Silva said.

The MPs comments come after Sri Lanka Customs defended its recent decision to halt the clearance of vehicles imported under cross-border LCs, which Customs said was to tackle tax evasion through under-valuation of vehicles.

Media reports indicate that hundreds of vehicles stranded at the ports, with Customs officials stating that the move only enforces existing import regulations. A surge of irregularities were reported following the resumption of vehicle imports, the Customs said, prompting the decision.

A majority of vehicle importers have been using LCs opened in third countries such as Singapore to declare purchase prices lower than the actual value of vehicles imported from manufacturing countries like Japan, according to Sri Lanka Customs.

Explaining further MP Harsha de Silva said the issue stems from the 2013 law which prohibits opening LCs in third countries, if the vehicle is a used vehicle. “Some cars have only been used for three days, while the mileage will be only three to four kilometres. But they are used vehicles,” De Silva explained, adding that used vehicles are often imported with a discount of around 15 per cent.

The MP pointed out that despite the 2013 regulation which prohibits third country LCs to import used vehicles, it had not been enforced until 2025. “What we feel is that this is due to the change of trading practices in the world. There are hubs now, such as Singapore, Dubai and Thailand,” he said.

“Vehicles manufactured in Japan and other countries are purchased in bulk, and these hubs then sell the vehicles through LCs,” he said. De Silva added that the government had now stated it would not honour the LC or clear the vehicles through Customs unless the documents were certified by a bank of the vehicle manufacturing country.

According to Customs, this practice amounts to duty fraud through the deliberate undervaluation of vehicles. MP De Silva questioned the decision to suddenly enforce the regulation, stating that this means that vehicles imported in this manner from 2013 are illegal imports. “If that is the case a forensic audit should be conducted, and everyone should be taxed this way,” MP De Silva said. (Newswire)

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Deputy Minister of Economic Development, Anil Jayantha Fernando, says news reports claiming that the Treasury has issued a red alert for vehicle imports are misleading and baseless.

Addressing the media, Deputy Minister Anil Jayantha said that the news report claims that the government has no foreign exchange for the import of vehicles and that it has resulted in a serious situation.

He clarified that the Central Bank of Sri Lanka and the Ministry of Finance have not issued any official statement in this regard, adding, “the news has been curated on baseless information.”

The Deputy Minister warned that such news reports can cause adverse effects in the local market, urging the public to be vigilant of such false news and the people behind such false information who benefit from such instances. (Newswire)

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The Department of Motor Traffic (DMT) has announced that the Taxpayer Identification Number (TIN) will be mandatory to register new vehicles and their related services.

Clarifying that the Taxpayer Identification Number (TIN) will be mandatory for the registration of new vehicles, the DMT said, however, certain types of vehicles are exempted.

The department said the TIN number is not mandatory for the registration or transfer of motorcycles, three-wheelers, tractors, hand-tractors and tractor-trailers. 

The clarification comes as the government had announced last month that following the lifting of vehicle import restrictions, the TIN number will be mandatory for the registration of vehicles. (Newswire)

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The Vehicle Importers Association of Sri Lanka (VIASL) says ships carrying vehicles from Thailand and Japan are due to arrive at the Hambantota Port this week.

Addressing the media, VIASL President Prasad Manage said that a ship from Thailand, carrying double cabs, will arrive tomorrow (26 Feb). 

He further said that another ship carrying a variety of vehicles from Japan will arrive on Thursday (27 Feb). 

Responding to questions on vehicle prices, he said double cabs are expected to cost between Rs. 24 million to Rs. 25.5 million.

He further said that vehicles from Japan, such as a Wagon R, can be obtained for Rs. 6 million or Rs. 6.5 million.

Pointing out that there was a significant reduction in prices compared to second-hand vehicles in 2018 and 2019, he said that the public will be able to purchase brand-new vehicles for a lower price.

The VIASL President expressed hope that customers will be able to see new vehicles at car dealers starting next week. (Newswire)

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Opposition MP Harsha de Silva has warned the government that vehicle imports will be risky as vehicle prices have shot up significantly and that the expected tax revenue might not be achieved.

Briefing the Parliament today on current vehicle prices, the MP said a Toyota Raize costs Rs. 12.2 million, a Toyota Yaris Rs. 18.5 million and a Prius Rs. 28.9 million.

“A big issue has arisen due to this. President Anura Kumara Dissanayake in his budget speech stated that the majority of tax revenue is expected from vehicle imports. The Gross Domestic Product needs to increase by about 1.6% and a part of that comes from vehicle imports. Therefore, vehicle imports are highly risky,” he said. 

MP Harsha de Silva questioned who can afford vehicles at the current prices, pointing out there are no such people in the country who can afford to purchase vehicles at such rates. 

Citing these factors, the MP said vehicle imports are very risky under the current circumstances. (Newswire)

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The Vehicle Importers Association says the Gazette issued yesterday on the removal of the temporary ban on vehicle imports applies only to four categories of vehicles.

Addressing the media, the Chairman of the Association Prasad Manage said the Gazette allows the import of over 25-seater buses, 10 to16 seater passenger transport vans, double cabs, and lorries. 

Prasad Manage further said that the duty structures for the import of these vehicles are yet to be announced, with the relevant circular expected to be issued today or in the coming days. 

Clarifying that, however, the Gazette does not apply to the imports of vehicles for personal use, he expressed confidence in the announcement being made soon. 

The Ministry of Finance, Planning, and Economic Development, under the leadership of Minister Anura Kumara Dissanayake, yesterday issued new regulations under the Imports and Exports (Control) Act, No. 1 of 1969. 

The regulations, cited as the Imports and Exports (Control) Regulations No. 01 of 2025, aim to facilitate the removal of the temporary suspension on the importation of motor vehicles. (Newswire)

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National Democratic Front (NDF) Parliamentarian Ravi Karunanayake has raised concerns over the government’s decision to recommence vehicle imports, highlighting risks to Sri Lanka’s economy. 

Addressing the media, MP Ravi Karunanayake said a policy must be made to ensure that the Rupee value does not fall due to the importing of vehicles. 

“If the Rupee falls it will increase the cost of expenditure of the country. This will cause a cost-push inflation. This will adversely affect the country’s tax burden. On the other hand interest rates will be increased to tackle the drop in the Rupee value. All of this will surpass the government’s expenditure,” he explained. 

MP Karunanayake said the government must implement a policy that will prevent the drop in the Rupee value and will increase foreign exchange. 

He commended the government’s plan for prior registrations to import vehicles, adding that this was a good mechanism, as imported vehicles cannot be hoarded for a long period. 

Stating that the NDF was not opposed to importing vehicles, MP Ravi Karunanayake said they are only highlighting the need to protect the Rupee while recommencing vehicle imports. 

“If they commence imports and the cost goes beyond what we earn through exports, then this will automatically result in the drop of the Rupee value. This will also result in cost-push inflation. We are advising them to recommence vehicle imports, keeping in mind these issues,” he said. (Newswire)

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Central Bank Governor Dr. Nandalal Weerasinghe has assured that Sri Lanka’s reserves and debt repayment will not be affected even if vehicle imports increase to US$ 1.5 billion a year.

Speaking during an interview with local television, Dr. Weerasinghe said that this could cause a small deficit in the current account deficit, instead of the much higher deficit seen in the past.

He said that after completing debt restructuring, the government can maintain reserves, make the required payments, increase government revenues, and balance the requirements, even if vehicle imports increase to US$ 1.5 billion.

His comments were in reference to the Central Bank’s projection that in 2024 relaxing commercial vehicle imports would result in forex needs of about US$ 500 million and private vehicle imports may require another billion US dollars a year.

The Central Bank Governor also noted that due to the depreciation of the Rupee and the imposition of a higher Value Added Tax (VAT), the cost of a new imported car has risen. 

Dr. Nandalal Weerasinghe said, in his opinion, the government may have to maintain taxes at a level that does not result in a steep fall in second-hand vehicles. 

“We must allow a person who wants a new vehicle to buy, but without encouraging people who do not want a new car to buy one. We have to balance it. But it is a fiscal policy of the government,” he added. (Newswire)

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Sri Lanka’s foreign reserves have reached approximately USD 6.5 billion, surpassing the targets set by the International Monetary Fund (IMF), Governor of the Central Bank of Sri Lanka Dr. Nandalal Weerasinghe said. 

Speaking during a meeting with newspaper editors, Dr. Weerasinghe revealed that Sri Lanka has successfully built its foreign reserves.

Responding to a question, the Central Bank Governor revealed that vehicle imports had to resume as the economy has now been stabilised. 

He further assured that vehicle imports would be carried out in a manner that would not adversely impact the nation’s foreign reserves.

Dr. Weerasinghe also highlighted that appropriate fiscal policies can help control vehicle imports. (Newswire)

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