Monday Apr 27, 2026
Monday Apr 27, 2026
Monday, 27 April 2026 00:21 - - {{hitsCtrl.values.hits}}
Vehicle imports slowed sharply in early 2026, with the sector’s contribution to growth and fiscal revenues beginning to taper even as March registrations rose on existing inventory, according to JB Securities.
JB Securities Chief Executive Officer Murtaza Jafferjee said monthly vehicle imports have shown a clear slowdown this year, particularly in personal vehicles, with import values declining from a peak of $ 240.9 million in December 2025 to $ 148.4 million in February. Commercial vehicle imports have also moderated, falling from $ 60.2 million in December 2025 to $ 45.2 million.
He said the record 59,734 registrations in March, up from 51,682 in February, were likely driven by inventory already in the country, either through new sales or dealers registering unsold stock to avoid the three-month deadline after which penalties apply, rather than fresh import momentum. The contraction in vehicle imports was a key factor enabling Sri Lanka to post a current account surplus in February.
In 2025, taxes from vehicle imports amounted to Rs. 905 billion, almost double initial expectations when the sector was reopened earlier in the year. This made a substantial contribution to GDP growth through higher net indirect taxes, with vehicles being the largest component, and supported a record primary fiscal surplus of 5.3% of GDP.
Factoring out the impact of the Gulf conflict, the February trend of slowing vehicle imports suggests that the sector’s contribution to both GDP growth and fiscal revenues is now beginning to taper.
The divergence between rising registrations and falling imports points to a lagged effect, with sales being cleared from existing stocks rather than supported by new inflows, reinforcing the view that momentum in the sector is easing.
On fuel pricing, Jafferjee said prices are set to increase significantly on 1 May, with the adjustment more pronounced for diesel. On at least one recent shipment, the Ceylon Petroleum Corporation paid a record $ 280 per barrel equivalent.
Based on current taxes and cost structures, this would imply a retail price of around Rs. 750 per litre. However, with the Government absorbing roughly Rs. 100 per litre, the expected pump price is likely to be closer to Rs. 500.
Petrol prices will also rise, though less sharply, as international prices have been relatively more stable; the Government subsidy here is expected to be limited to about Rs. 20 per litre.
He said that, given Sri Lanka’s backward-looking pricing formula, May prices largely reflect costs incurred during March and early April to ensure adequate supply. Delaying adjustments weakens the price signal and dampens behavioural change.
Large one-off revisions tend to create market distortions. Fuel stations may restrict sales to build inventory ahead of anticipated increases or run down stocks when prices are expected to fall, leading to temporary shortages.
While daily pricing would be ideal, it may require infrastructure upgrades at fuel stations; as an interim step, moving to weekly price revisions would reduce these distortions.
Jafferjee said higher fuel prices will drive behavioural shifts, particularly accelerating demand for electric vehicles (EVs). Although electricity tariffs are also likely to rise, potentially through surcharges, self-consumption via rooftop solar systems makes EV ownership increasingly viable.
He also said current vehicle taxation remains highly distortionary. Excise duties are tied to engine capacity for hybrid and internal combustion vehicles, and to motor power for EVs, creating inconsistencies across technologies.
With more than 50% of vehicle tax revenues now derived from ad valorem components, there is a case for shifting entirely to an ad valorem-based system. Tax policy should prioritise economic efficiency, while issues such as under-invoicing are administrative and should be addressed through stronger governance and enforcement mechanisms rather than by distorting the tax structure.
