Sri Lanka’s Automotive Sector: Present Trends and Future Outlook
- CNL Reporter
- March 24, 2025
- Business News
- NEWS OF THE DAY
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NEWS OF THE DAY
Sri Lanka’s automotive assembly sector currently experiencing a significant growth, becoming pivotal for the nation’s industrial landscape is to hit disastrously by imposing tax on tax and lifting vehicle import ban without any protective measures for the local industry, leading assemblers complained. .
The new government’s move comes at a time in which the benefits of the Standard Operating Procedure (SOP) for the industry, and strategies to penetrate the Indian market, particularly Tamil Nadu area bearing fruits, Nalin Welgama, Founder and Executive Chairman of Ideal Motors told the Sunday Times Business .
Under his leadership, Ideal Motors partnered with India’s Mahindra & Mahindra to assemble vehicles locally is boosting the domestic automotive industry
Sri Lanka operates over 17 vehicle assembly plants producing a diverse range of vehicles, including motorcars, SUVs, motorcycles, and electric three-wheelers.
An additional 17 investors are preparing to commence operations, signaling robust industry growth
. The sector directly employs over 5,000 technically skilled workers and indirectly supports more than 10,000 jobs, underscoring its role in national economic development.
While this decision of lifting vehicle import ban is expected to enhance government revenue through duties and taxes, it poses challenges for the local assembly industry, Mr Welgama said a advocating for a competitive tax structure that prioritises locally assembled vehicles to sustain growth, attract investments, and ensure long-term viability.
Hydrogen fuel cell vehicles (FCVs) are emerging as an alternative to battery-electric vehicles. They offer longer driving ranges and quicker refueling times.
However, the development of hydrogen infrastructure is still in its infancy globally, and high production costs remain a barrier to widespread adoption. For Sri Lanka, investing in hydrogen technology would require substantial infrastructure development and policy support, he said.
Sri Lanka’s component manufacturing sector is now producing high-quality automotive parts, including batteries, tires, bumpers, exhaust systems, seats, plastic and composite parts, liners, wire harnesses, rubber components, and metal components.
These advancements have elevated the sector to international standards, positioning Sri Lanka as a competitive player in the regional automotive supply chain. The industry aims to increase component export revenues from $800 million to $2 billion within the next five years, creating an additional 45,000 jobs, he pointed out.
The Ministry of Industries’ Standard Operating Procedure (SOP) has provided a structured framework for the automotive industry, facilitating streamlined operations and regulatory clarity. This has attracted both local and international investors, fostering an environment conducive to industrial growth and technological advancement, he revealed. .
Tamil Nadu, a neighboring state of Sri Lanka, is a significant hub for India’s automotive industry. Sri Lankan companies can explore joint ventures and collaborations to penetrate this market.
For instance, Lanka Ashok Leyland, a joint venture between Lanka Leyland Ltd (a wholly-owned company of the Government of Sri Lanka) and Ashok Leyland Ltd India, imports commercial vehicles in both knock-down kits and fully built units, carrying out assembly operations, repair and service, and body building on chassis.
Such collaborations can serve as models for future partnerships, leveraging Tamil Nadu’s established automotive ecosystem to enhance Sri Lanka’s industry capabilities, he explained.
Sri Lanka’s vehicle fleet comprises approximately 8.5 million vehicles, including 5 million motorcycles, 1.3 million three-wheelers, and 2.2 million other vehicles.
Importing electric vehicles will not be a viable option for Sri Lanka at present as the present in adequacy of widespread charging stations may hinder EV adoption, he predicted. .
EVs often have higher upfront prices compared to internal combustion engine vehicles, which could deter consumers, he said adding that increased electricity demand from EVs may strain the existing power grid, necessitating upgrades.
