By: Staff Writer
August 06, Colombo (LNW): Sri Lanka’s long-dormant motor vehicle industry has staged a remarkable comeback, generating nearly Rs. 900 billion in Customs revenue within the first six months of 2026 following the resumption of vehicle imports. While the surge has provided a significant boost to Government finances, it has also reignited debate over the country’s dependence on imports, foreign exchange outflows and the sustainability of the sector’s recovery.
According to the Ceylon Chamber of Commerce’s Motor Vehicle Industry Report 2025/26, the industry contributed Rs. 896.4 billion in Customs revenue during the first half of the year, while more than 327,000 new vehicles were registered across the country. The figures represent one of the strongest recoveries for a sector that remained largely dormant following the Government’s suspension of vehicle imports in 2020 to conserve scarce foreign exchange.
The report, released after a six-year hiatus, paints a picture of an industry regaining momentum as pent-up consumer demand, easing import restrictions and improved economic conditions drive renewed activity. Dealers, financial institutions and insurers have all benefited from the reopening of the market, while the Treasury has emerged as one of the biggest beneficiaries through increased tax collections.
However, economists caution that the impressive revenue figures tell only part of the story.
Sri Lanka continues to rely heavily on imported vehicles, making the sector a significant consumer of foreign exchange. Although the reopening of imports has strengthened Government revenue, analysts warn that sustained growth in vehicle imports could place renewed pressure on the country’s external sector if not carefully managed alongside export earnings and remittance inflows.
The Chamber notes that the industry is gradually moving beyond a purely import-based model. More than 15 vehicle assembly plants are now operating locally, supported by Government policies requiring at least 20 percent domestic value addition in assembled vehicles. Industry stakeholders argue that expanding local assembly could create employment, strengthen supply chains and reduce dependence on fully imported vehicles over the long term.
The report also highlights broader changes transforming the global automotive industry. Electric vehicles now account for one in every four new cars sold worldwide, with annual EV sales surpassing 20 million units for the first time. Artificial intelligence is also reshaping vehicle design and manufacturing, enabling manufacturers to shorten development cycles while improving safety and efficiency.
Against this backdrop, Sri Lanka faces the challenge of modernising its automotive sector while balancing fiscal gains with macroeconomic stability. The Chamber’s report suggests that future policy should encourage investment in local manufacturing, promote cleaner technologies and provide a predictable regulatory framework that supports both industry growth and economic resilience.
As vehicle imports gather pace once again, policymakers will need to ensure that the sector becomes not only a source of tax revenue but also a driver of industrial development capable of contributing to Sri Lanka’s long-term economic transformation.
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