Vehicle registrations hit new high in May

• Surge 19.7% M-o-M to 60,444 units
• Brand-new car registrations jump 164% as buyers appeared to frontload purchases ahead of regulatory tightening
• Affordable EVs dominate demand, led by BAW E7 and BYD Atto 1
• Tighter LTV rules, rising interest rates and import surcharge to cool momentum

Sri Lanka’s vehicle market recorded its strongest monthly performance since the reopening of imports, with total registrations surging 19.7% month-on-month (M-o-M) to 60,444 units in May as consumers accelerated purchases ahead of tighter financing rules and higher import taxes, according to HNB Stockbrokers.

The sharp increase reversed the softer trend seen in April and extended the recovery that has been underway since the beginning of the year. Total registrations rose from 47,900 units in December 2025 to 54,100 in January before easing to 49,900 in February, recovering to 55,500 in March, dipping to 50,500 in April, and then climbing to a five-month high of 60,444 in May.

Two-wheelers continued to dominate overall volumes, accounting for 43,166 registrations, up 11.9% M-o-M, while brand-new car and Sports Utility Vehicle (SUV) registrations recorded stronger growth as buyers moved ahead of impending regulatory changes.

HNB Stockbrokers said the May surge likely reflected a combination of resilient demand for affordable electric vehicles (EVs) and the frontloading of purchases before the implementation of tighter loan-to-value (LTV) requirements and the Government’s vehicle import surcharge.

“The sharp increase in May registrations likely reflects a combination of resilient demand for affordable EVs and the frontloading of purchases ahead of regulatory changes,” the brokerage said.

The research house noted that strong performances from the BAW E7 and BYD’s Atto 1 reinforced the dominance of budget-friendly EV offerings, adding that affordability remains the key determinant of purchasing decisions within the passenger vehicle segment.

“Nevertheless, the concentration of registrations among lower-priced EV models suggests that affordability remains the primary driver of purchasing decisions within the passenger car segment,” it said.

Brand-new motor car registrations recorded the most dramatic increase, jumping 164.3% M-o-M to 1,110 units in May after plunging 71% in April. BAW retained market leadership with 519 registrations, an increase of 203.5% M-o-M, while BYD registrations rose nearly seven-fold to 436 units. Perodua registrations increased 35.4% to 65 units.

At the model level, the BAW E7, priced at approximately Rs. 5-6 million, remained the country’s most popular new passenger car, followed by the BYD Atto 1, priced between Rs. 7-9 million.

EVs accounted for 91% of all brand-new motor car registrations during the month, driven primarily by the BAW E7, BYD Atto 1, and Dolphin models.

The SUV segment presented a more mixed picture. Brand-new SUV registrations declined 12.3% M-o-M to 1,606 units, although volumes remained elevated. Suzuki maintained its leadership position with a 32.6% market share, supported by the Fronx, while BYD expanded its market share to 20.3% following an 87.7% increase in registrations.

HNB Stockbrokers said demand for BYD’s Atto 2 was helping accelerate EV adoption in the SUV category, particularly after supply disruptions affecting the Atto 3.

“While traditional ICE models continued to dominate overall volumes, the strong performance of the BYD Atto 2 highlights growing demand for affordable EV options,” the report noted.

Internal combustion engine vehicles continued to account for 66% of SUV registrations, but EV penetration increased sharply to 18% in May from 6% in April, signalling a gradual shift in consumer preferences as more competitively priced electric models enter the market.

Commercial vehicle registrations also remained robust, with 2,002 units registered during May, of which 1,055 units, or just over half, were brand new.

Looking ahead, the brokerage expects recent policy measures to moderate demand momentum.

Effective 25 May, the Central Bank of Sri Lanka (CBSL) reduced maximum LTV ratios for motor cars, SUVs, vans, and three-wheelers to 40% from 50%, while commercial vehicle LTVs were lowered to 60% from 70%, increasing the upfront cash contribution required from buyers.

At the same time, the Government imposed a temporary 50% surcharge on the existing 30% Customs Import Duty applicable to imported vehicles, raising acquisition costs through both higher duties and their cascading effect on other taxes.

HNB Stockbrokers said the combined impact of tighter financing conditions and higher import costs is likely to weigh on affordability and dampen demand in coming months.

“The impact is expected to be more pronounced across mid- to high-end vehicle segments, where affordability sensitivity is generally higher, while lower-priced segments may remain relatively more resilient,” the brokerage said.

For now, however, May’s registration figures suggest buyers moved decisively to secure vehicles before the new rules took effect, delivering a strong boost to dealers and distributors and underscoring the growing appeal of affordable EVs in Sri Lanka’s recovering automotive market.