Sri Lanka’s once-booming vehicle market is showing clear signs of deceleration. After an initial surge in imports earlier this year, prices of imported vehicles have begun to slide sharply — by as much as Rs. 1.5 million reflecting both a glut in supply and a slowdown in new vehicle demand.
According to the Central Bank of Sri Lanka, personal vehicle imports cost the country USD 705 million between January and August 2025, marking one of the largest foreign exchange outflows since the government eased its post-crisis import restrictions. However, the expected boom in sales has not materialized. Instead, showrooms are now struggling with a growing backlog of unsold, unregistered vehicles, as many consumers delay purchases amid tighter credit conditions and rising living costs.
Vehicle Importers Association of Lanka (VIAL) President Indika Sampath Merinchige told reporters that unauthorized and grey-market imports have worsened the market imbalance, pushing down retail prices across all segments. “We are seeing a correction in the market — a combination of oversupply, reduced consumer affordability, and falling prices from Japan,” he said.
The price cuts are substantial. An unregistered Honda Vezel Z Play 2025 SUV, once sold at Rs. 25.5 million, is now priced around Rs. 23.5 million. The Toyota Yaris has dropped to Rs. 10.5 million from Rs. 11.5 million, while the Suzuki Alto Hybrid now costs Rs. 7.3 million, down from Rs. 7.9 million. Similarly, the Suzuki Wagon R has fallen to Rs. 7.3 million from Rs. 7.8 million.
The shift is partly linked to falling wholesale prices in Japan Sri Lanka’s largest vehicle source market — and a stronger yen-to-rupee conversion advantage in recent months. But analysts say the domestic slowdown goes beyond pricing factors. “After two years of pent-up demand, the initial rush for vehicles has eased. High bank interest rates, tighter leasing terms, and weak consumer confidence have created a sharp cooling effect,” said an industry source.
Toyota continues to dominate the import segment, with its Raize, Yaris, and LC300 Prado models leading sales, followed by Ford Raptor pickups and Honda Vezel SUVs. However, smaller models such as Suzuki Wagon R have lost traction due to outdated designs and competition from newer hybrid imports.
The market imbalance has also raised broader economic concerns. Vehicle imports remain a heavy drain on foreign reserves, while slowing sales have hurt dealers, spare parts suppliers, and logistics operators. Economists warn that if the trend continues, the government may face renewed pressure to reintroduce selective import curbs to stabilize the trade balance.
With rising inventory and falling demand, Sri Lanka’s auto market faces a challenging road ahead one that may test both importers and policymakers trying to steer between growth and fiscal prudence.
