Does Sri Lanka Produce Cars? The Truth About Its Automotive Industry

When you think of car manufacturing in South Asia, India often comes to mind first. But what about Sri Lanka? Does it make cars? The short answer is: not anymore. Not in any meaningful, large-scale way. But the story behind that answer is more interesting than a simple yes or no.

What Happened to Sri Lanka’s Car Industry?

Sri Lanka did have a small automotive assembly industry in the 1970s and 1980s. Back then, the government pushed for import substitution - meaning they wanted to make things locally instead of buying them from abroad. One of the main players was Sri Lanka Automobiles a state-owned enterprise established in 1972 to assemble vehicles using imported kits. They put together models like the Isuzu Elf truck and the Toyota Corolla using parts shipped in from Japan. These weren’t fully made in Sri Lanka - they were assembled from knock-down kits, or CKD as it’s called in the industry.

By the late 1990s, this effort faded. Why? Because it wasn’t cost-effective. Sri Lanka’s population is just over 22 million. That’s smaller than the metro area of Delhi. The local market couldn’t support the scale needed to make car manufacturing profitable. Import tariffs were high, but the cost of labor, logistics, and spare parts still made local assembly more expensive than just importing fully built cars.

By 2005, the government removed most of the protectionist policies. Suddenly, cheaper, fully built cars from India, Thailand, and China flooded the market. Local assembly lines shut down. The last major plant, which had been assembling Isuzu and Toyota vehicles, closed in 2007. Since then, no company has tried to restart full-scale vehicle production.

Are There Any Car Makers in Sri Lanka Today?

No. There are no car manufacturers in Sri Lanka today that design or produce vehicles from scratch. But that doesn’t mean there’s zero activity. A few small companies do something called remanufacturing - they take old, worn-out vehicles and rebuild them. These aren’t new cars. They’re restored used cars, often from Japan, that get new engines, transmissions, and bodywork. Some even get electric conversions.

One example is Sri Lanka Electric Vehicles a startup that converts old Toyota Corollas into electric cars using imported battery packs and motors. They’ve built around 40 units since 2020. These aren’t mass-produced, and they’re not sold in showrooms. They’re used by government agencies, NGOs, and a few private buyers who want a green alternative.

There’s also a handful of micro-manufacturers making custom body parts - like fiberglass hoods or custom bumpers - for imported vehicles. But these are accessories, not whole cars. They don’t count as automotive manufacturing in the traditional sense.

Why Doesn’t Sri Lanka Make Cars Like India Does?

India’s automotive industry is massive. It produces over 5 million vehicles a year. Why can’t Sri Lanka do the same? It comes down to three big factors: scale, supply chains, and policy.

First, scale. India has a population of 1.4 billion. Sri Lanka has 22 million. That’s 63 times smaller. Car companies need volume to make money. A factory in India can produce 100,000 cars a year and still be profitable. In Sri Lanka, even selling 5,000 cars a year would be considered a success - and that’s not enough to cover the fixed costs of a production line.

Second, supply chains. In India, there are thousands of auto parts suppliers within a few hundred kilometers of major plants. In Sri Lanka, nearly every bolt, wire, and sensor has to be imported. That makes production slow and expensive. Even if a company wanted to start making cars, they’d have to import everything - from tires to seat belts.

Third, policy. India offers tax breaks, land subsidies, and export incentives to auto makers. Sri Lanka doesn’t have that kind of support. In fact, the government has been more focused on importing used cars from Japan and the UAE - which are cheaper than buying new ones locally.

What Do Sri Lankans Drive?

Most cars on Sri Lankan roads are used imports. Around 80% of the vehicles were previously owned in Japan, the UK, or the UAE. You’ll see a lot of Toyota Vitz, Honda City, and Nissan March models - all from the 2000s and 2010s. New cars are rare and expensive. A brand-new Toyota Corolla costs over $40,000 in Sri Lanka, while a used one from Japan might cost $8,000.

Electric vehicles are starting to appear, mostly as imports. Companies like BYD a Chinese electric vehicle manufacturer that began exporting to Sri Lanka in 2023 and Tata Motors an Indian automaker that launched the Tiago EV in Sri Lanka in 2024 are now selling EVs there. But again - they’re imported, not made there.

Could Sri Lanka Ever Make Cars Again?

It’s possible - but only under very specific conditions. If Sri Lanka wanted to restart car manufacturing, it would need to focus on a niche. Not mass-market sedans. Not SUVs. Something smaller.

One realistic path: electric micro-vehicles. Think of three-wheeled electric taxis or small delivery vans. These are cheap to make, easy to charge, and perfect for Sri Lanka’s crowded cities and narrow roads. India already has companies like Ola Electric and Ather Energy making these. Sri Lanka could partner with them.

Another option: assembling EVs from imported kits. Not full manufacturing - just final assembly. That’s what Vietnam and Indonesia did to build their EV industries. Sri Lanka could do the same, using tax breaks to attract foreign investors. The government has already started offering incentives for EV imports. Extending that to local assembly could be the next step.

But without a clear strategy, strong government backing, and investment from global players, Sri Lanka won’t build its own cars anytime soon.

How Does This Compare to India’s Auto Industry?

India isn’t just a bigger market - it’s a completely different ecosystem. Indian automakers like Tata Motors India’s largest vehicle manufacturer, producing everything from trucks to electric cars and Maruti Suzuki a joint venture that makes over 40% of India’s cars have factories that produce over a million units a year. They design engines, build transmissions, and make their own parts. They export to over 80 countries.

Sri Lanka doesn’t have any of that. It doesn’t have a single auto parts supplier that makes a clutch or a radiator for export. India has over 1,000 auto component manufacturers. Sri Lanka has maybe five or six small workshops.

India’s government spends billions on auto parks, R&D, and export promotion. Sri Lanka’s entire annual budget for industrial development is less than what Tata spends on one new factory.

The difference isn’t about talent or ambition. It’s about resources, scale, and long-term planning.

What’s the Future for Sri Lanka’s Automotive Sector?

The future isn’t in making cars from scratch. It’s in supporting the ones already on the road. That means:

• Expanding EV charging infrastructure
• Training mechanics in electric vehicle repair
• Creating recycling programs for old batteries
• Encouraging local production of EV parts - like chargers or battery enclosures

There’s a chance Sri Lanka could become a regional hub for EV maintenance and parts distribution. That’s not glamorous, but it’s realistic. And it’s where the real economic opportunity lies.

For now, Sri Lanka doesn’t produce cars. But it’s still part of the global automotive story - just not as a maker. As a user. As a repairer. As a buyer. And maybe, one day, as a small-scale EV assembler.