ECONOMYNEXT – An 18-member Indian delegation from the Society of Indian Automobile Manufacturers (SIAM) visited Sri Lanka this week as the island nation’s import demand for vehicles is expected to rise after the new government relaxed the ban on vehicle imports.
The delegation included representatives from leading Indian vehicle manufacturers across all segments, including commercial vehicles, passenger vehicles, two-wheelers, and three-wheelers, the Indian High Commission in Colombo said in a statement.
“This visit further strengthens the economic partnership between India and Sri Lanka, fostering collaboration and development in the automobile industry,” it said.
Sri Lanka imposed the vehicle import ban in 2020 as the country was facing a foreign exchange shortage.
With the recovery from an unprecedented bankruptcy, President Anura Kumara Dissanayake’s new government relaxed the ban on vehicle imports with high taxes.
During the visit, the delegation called on Minister of Industry and Entrepreneurship Development, Hon. Sunil Handunneththi, and Deputy Minister of Industry and Entrepreneurship Development, Hon. Chathuranga Abeysinghe.
They also held meetings with senior officials from the Ministry of Finance, Board of Investment of Sri Lanka, and with the members of Ceylon Motor Traders Association.
India has long been a dominant player in Sri Lanka’s vehicle market, supplying a significant portion of the country’s two-wheelers, three-wheelers, and passenger cars.
Indian automobile brands like Tata, Bajaj, Maruti Suzuki, Mahindra, and TVS have enjoyed widespread popularity due to their affordability, fuel efficiency, and suitability for Sri Lankan road conditions.
Before 2020, Sri Lanka was one of the largest markets for Indian vehicle manufacturers, with steady demand for motorcycles, tuk-tuks (three-wheelers), and compact cars. However, in March 2020, the Sri Lankan government imposed an import ban on vehicles as part of broader restrictions to curb foreign exchange outflows amid a deepening economic crisis.
This decision was driven by the urgent need to conserve foreign reserves, which were dwindling due to the COVID-19 pandemic’s economic fallout. As a result, vehicle imports—including those from India—came to a complete halt, leading to severe disruptions in the automobile sector.
The ban particularly affected Indian manufacturers, who relied on Sri Lanka as a major export destination, and Sri Lankan businesses, including vehicle dealers and leasing companies, who faced revenue losses due to dwindling stock.
Sri Lanka witnessed a sharp increase in vehicle prices after the import ban. With supply cut off and demand remaining high, prices of second-hand Indian vehicles skyrocketed.
Thousands of workers in Sri Lanka’s automobile trade, including those involved in vehicle sales, financing, and servicing, were directly affected. Additionally, the lack of new vehicle imports reduced government revenue from custom duties and import taxes, which were traditionally a significant source of income.
The new government has selectively eased restrictions on certain categories, such as commercial vehicles, but private vehicle imports remain restricted.
If the ban is fully lifted, Indian vehicle manufacturers could regain a strong foothold in the Sri Lankan market, but affordability concerns may persist due to higher import taxes amid fears of currency depreciation, analysts say. (Colombo/March 19/2025)
Continue Reading
