Vehicle prices in Sri Lanka are expected to rise significantly as the government’s 50% surcharge on Customs Import Duty has been extended until December 31, 2026, according to vehicle importers.
The extension means that vehicles imported under Letters of Credit (LCs) opened after the surcharge was introduced will enter the market with a higher tax burden.
The industry representative said vehicles currently available in many showrooms were largely imported under LCs opened before the surcharge came into effect. As a result, these vehicles have not been affected by the additional duty. However, the situation is now changing as importers begin clearing vehicles linked to LCs opened after the surcharge was introduced.
“Moving forward, all our incoming vehicles are those for which LCs were opened after the initial implementation of the surcharge,” the representative said, warning that customers should expect higher prices for newly arriving vehicles.
According to the representative, around 90% of vehicles cleared up to now were associated with LCs opened before the surcharge was imposed. With those vehicles gradually being cleared, the market is expected to see a greater number of vehicles subject to the additional duty.
The representative said this could create an opportunity for customers who are considering purchasing a vehicle from existing showroom stocks. Since many of the vehicles currently available were imported under the earlier LCs, they could be sold at prices that are lower than those expected for future shipments affected by the surcharge.
The estimated impact varies considerably depending on the model. The representative said the price of a Suzuki Alto could increase by around Rs. 100,000, while a Suzuki Wagon R could see an increase of approximately Rs. 500,000. For larger and more expensive vehicles, the impact could be substantially higher.
A Honda Vezel could become around Rs. 2 million more expensive, while a Toyota Prado could see an estimated increase of about Rs. 3 million. The representative placed the potential increase for a Toyota Land Cruiser at approximately Rs. 5 million, while double-cab models could rise by between Rs. 2 million and Rs. 2.5 million.
The industry representative also raised concerns about the wider impact of frequent changes to vehicle taxation. While acknowledging the government’s objective of protecting foreign exchange reserves and controlling vehicle imports, the representative argued that repeated changes to duties can create uncertainty and volatility in the market.
The industry has called for discussions with the government on alternative methods of controlling vehicle imports without causing sharp fluctuations in prices. One proposal is to use other mechanisms, including tighter controls on LCs, so that import volumes can be managed while providing greater stability and predictability for consumers and businesses.
The representative also addressed recent comments attributed to a person connected to the Japanese vehicle export industry. The representative stressed that the remarks should not be interpreted as an official position of Japan or the Japan Used Motor Vehicle Exporters Association, saying they represented the personal views of an individual.
The industry representative said the association itself had not issued such a statement and urged the Sri Lankan authorities to distinguish between personal comments and official positions when dealing with international trade partners.
