Sri Lanka has faced soaring car prices due to limited supply, a weak currency, and high import taxes. The country plans to ease its ban on vehicle imports, a sign of recovery after a severe economic crisis.
From 1 February, authorities will allow imports of buses, trucks, and utility vehicles. Restrictions on other vehicles, including private cars and taxis like three-wheeled trishaws, will be gradually lifted. Many citizens eagerly await further easing.
Economic Crisis and High Prices
Sri Lanka’s car prices remain high due to supply shortages, weak currency, and hefty taxes. In 2022, the country experienced its first-ever default on foreign debts amid a foreign currency crisis. The 22 million residents faced shortages of essentials like food, fuel, and medicine. Massive protests led to President Gotabaya Rajapaksa’s resignation.
The country later secured a $2.9 billion IMF bailout. The new government introduced measures like tax hikes and reduced energy subsidies. While the economy is slowly stabilizing, financial hurdles persist.
Vehicle import restrictions have caused prices of used cars to double or triple. For example, a vehicle once priced at 2.5 million rupees now costs around 5 million rupees.
Impact on Citizens and Businesses
People like Gayan Indika, a wedding car provider and part-time cab driver, have been hit hard by the import ban. “I need a new car to keep my rental business running,” he said, explaining his financial struggles.
Sasikumar, a software engineer in Kandy, described how a lack of good public transport makes owning a car essential. “We need reliable transport options,” he said. “Either the government should lift the car ban or improve public transport.”
The vehicle import sector was once a booming industry. Arosha Rodrigo, whose family has run a car dealership for decades, said they imported 100 cars monthly before the ban. Since then, they haven’t imported a single vehicle. Even if the restrictions ease further, many people may still find it difficult to buy cars.
High excise duties ranging from 200% to 300%, coupled with an 18% Value Added Tax, have made cars expensive. The weak rupee against global currencies like the US dollar also worsens the situation.
Who Can Afford New Vehicles?
Murtaza Jafeerjee, chair of the Colombo-based think tank Advocata, supports the government’s move. He believes resuming vehicle imports will boost revenue and related industries like car financing, repairs, and sales. However, the government is cautious. Information Minister Nalinda Jayatissa said authorities want to avoid excessive imports that could drain foreign reserves.
The central bank plans to allocate up to $1 billion for vehicle imports this year, releasing funds gradually. But with current taxes and currency issues, affordability remains a concern. Teacher R. Yasodha reflected on her family’s struggles, stating, “We’ve waited long, but car prices have doubled. For us, it’s almost impossible now.”
Sri Lanka must find a balance between opening up its vehicle market and ensuring its people can afford basic mobility solutions.