Rs.100bn revenue leakage looms for motor industry, warns CMTA

•  Systemic undervaluation and regulatory loopholes set to bleed state coffers this year
•  CMTA pushes for scrapping of 15% depreciation concession on used vehicle imports
•  Six-pillar roadmap targets spare parts smuggling and technical talent drain  

By Nishel Fernndo

Sri Lanka’s automotive industry could see government revenue leakages exceed Rs.100 billion by the end of this year, due to unchecked regulatory loopholes and systemic undervaluation, Ceylon Motor Traders Association (CMTA) Chairman Andrew Perera warned.

The projected leakage is a significant figure when set against the state’s wider fiscal position: it amounts to close to 2 percent of Rs.5.3 trillion in total government revenue budgeted for 2026 and to roughly a fifth of Rs.550 billion in vehicle import tax revenue the Parliamentary Committee on Public Finance has projected the sector will generate this year.

Addressing the association’s 106th Annual General Meeting in Colombo last Friday, Perera said the revenue leakage to the government amounted to Rs.40 billion in 2025 and that figure would rise to Rs.80 billion by the end of this year if the existing regulations, including the 15 percent depreciation concession offered to used vehicle importers, remained unchanged. 

He said the Rs.80 billion projection captured only the leakage that could be reliably calculated from used vehicle import volumes and that the true figure was considerably higher, once the other malpractices were accounted for. 

Perera cited undervaluation, failure to file proper returns, loopholes exploited through individual imports, inadequately monitored EPF/ETF contributions and VAT thresholds that remained too high for services and spare parts as contributing factors. Taking these into account, he estimated the total losses to the state coffers would exceed Rs.100 billion by the end of the year.

The warning comes as the government continues to ease the five-year vehicle import ban that was imposed to conserve foreign exchange reserves. While the gradual reopening of imports has restored confidence among the local motor traders, Perera said it had also exposed the need for a level playing field across the industry, prompting the CMTA to set out a six-pillar roadmap for the year ahead under the theme ‘Synergy in Action: A Unified Approach’.

Under the first pillar, policy advocacy and regulatory reform, the CMTA has been engaging the Finance Ministry since September to push for the removal of the 15 percent depreciation concession and the closure of loopholes enabling revenue leakage, including in the electrification space. 

The second pillar, stakeholder engagement, includes a deepened relationship with the Society of Indian Automobile Manufacturers, which has invited the CMTA to its Auto Expo in India in February next year, as the association works towards building a broader automotive policy roadmap for Sri Lanka.

The third pillar centres on the ‘Buy Brand New’ consumer education campaign, which highlights the risks associated with used vehicles such as mileage tampering, accident history and the absence of manufacturer recall actions. 

Perera noted that the new-to-used vehicle sales split improved to 43:57 last year, the best ratio in a decade and said the CMTA hoped to shift a further five to 10 percent of buyers towards brand-new vehicles. The campaign is being run alongside a crackdown on counterfeit and smuggled spare parts, led by committee member Tharindra, with the support from the members including AMW, DIMO, Ideal and Kia, in coordination with Sri Lanka Customs.

The fourth pillar, capacity building and talent development, addresses the technical talent drain affecting the industry as skilled staff move to neighbouring countries. The CMTA’s partnership with the Sri Lanka Institute of Marketing has completed its third intake of the ‘License to Sell’ programme, a 15-week course that drew 50 participants from the member companies this year. 

The association also plans to expand technical training partnerships, drawing on the Japanese, German, Korean and Chinese expertise and is working with the Automotive Industry Council, which is backed by four government ministries, to upskill technicians nationally.

The fifth pillar, industry engagement, follows the success of Ceylon Motor Show 2025, held at the BMICH in partnership with the Classic Car Club, which generated the highest revenue the CMTA has recorded from a single event. Perera confirmed the next motor show has been scheduled for July next year. 

The sixth pillar, road safety, sees the CMTA partnering with the Sri Lanka Medical Association on a project called ‘Helmet Heroes’ to distribute free SLS-certified helmets. Perera noted that road accidents killed 2,746 people last year, the highest figure on record, of which 128 fatalities involved children under the age of six, largely due to the lack of access to SLS-certified helmets.

Perera welcomed John Keells CG Auto, Hayley’s Mobility and Mel’s Automobile as new corporate members during the AGM. The meeting also saw Lakmal de Silva of David Pieris Motor Company Limited elected Senior Vice Chairman and Shalin de Silva of United Motors Lanka PLC elected Vice Chairman of the CMTA for 2026-2027, with Lakmal de Silva set to take over as Chairman following next year’s motor show. 

Perera closed by emphasising that the industry’s progress depended on unity among its members, stating that no single member could achieve the association’s goals alone.