Sri Lanka’s Automotive Industry in 2025: A New Era of Growth and Global Integration

Sri Lanka’s automotive industry is experiencing significant transformations, driven by policy changes, growth in local manufacturing, and international collaborations.

Lifting of Import Restrictions

In a notable policy shift, the Sri Lankan government announced the phased lifting of the temporary suspension on motor vehicle imports, effective October 1, 2024. This decision aims to rejuvenate the automotive sector and address the challenges of an aging vehicle fleet. The phased approach includes:

• Stage 1 (October 1, 2024): Resumption of imports for public passenger transport vehicles and special-purpose vehicles.
• Stage 2 (December 1, 2024): Lifting of restrictions on commercial or goods transportation vehicles.
• Stage 3 (February 1, 2025): Permission for the importation of personal usage motor vehicles, including cars, vans, SUVs, and pickups.

This strategic easing is anticipated to inject vitality into the auto industry and enhance government revenue.
Source: Daily News LK

Growth in Local Assembly and Component Manufacturing

Sri Lanka’s local vehicle assembly and automotive component manufacturing sectors are experiencing substantial growth. Currently, over 17 assembly plants are operational, producing a diverse range of vehicles such as motorcars, SUVs, motorcycles, and electric three-wheelers. An additional 17 investors are preparing to commence operations, signaling robust industry expansion.

This sector has directly employed over 5,000 technically skilled workers and supports more than 10,000 indirect jobs.
Source: Ada Derana Business

The government’s support includes covering 50% of the cost for International Automotive Task Force (IATF) certification for local component manufacturers—key to competing in global markets.
Source: Daily FT

International Collaborations and Market Expansion

To support industry capacity building, Sri Lankan automotive component manufacturers are forming international partnerships. A notable example is the government-supported business delegation to Thailand in late 2024, where local businesses explored manufacturing partnerships and advanced supply chains.
Source: News.lk

Market Outlook and Challenges

Despite these positive developments, market data suggests a slight decline in vehicle registrations—from 11,100 units in 2023 to around 10,600 units in 2028, reflecting a compound annual decrease of 0.6%.
Source: ReportLinker

However, the used car market is booming, estimated at $202.13 million in 2025 with a projected compound annual growth rate of 7.8% through 2033. This is driven by affordability, a growing middle class, and expanding urbanization.
Source: Data Insights Market

Conclusion

Sri Lanka’s automotive sector is at a pivotal point—moving from survival to growth. With new policies, increased local production, and stronger global partnerships, the country is positioning itself as a rising player in South Asia’s automotive supply chain.