Imports Boom, Local Plants at Risk

Sri Lanka’s vehicle import surge that powered record tax revenues in 2025 is losing steam, and industry leaders warn the fallout could hit domestic manufacturers hard. Parliamentary analysis shows vehicle-related taxes delivered nearly Rs. 600 billion of last year’s unexpected revenue windfall, but the reopening of imports without safeguards for local assembly—has tilted the market sharply.

The country now hosts 17 vehicle assembly plants employing over 15,000 people, with more investors waiting in the wings. Cheaper imports, benefiting from global scale and supply chains, threaten to undercut locally assembled vehicles, which face higher production costs.

While policymakers eye imports to plug fiscal gaps, manufacturers argue that incentives for domestic assembly are essential to protect jobs, sustain investment and support the fast-growing auto components export sector. As import revenues cool in 2026, the debate over balancing taxes with industrial growth is intensifying

 

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