Three years after its financial crisis, Sri Lanka is set to re-open its doors for the imports of commercial vehicles, construction equipment, and electric vehicle makers, starting September 2023, Sri Lankan Finance Minister Shehan Semasinghe said in an interview with Autocar Professional.
The nation may progressively open doors to two-wheeler makers like Bajaj Auto and TVS Motor in 2024.
After the socio-economic unrest that unravelled a financial crisis in the country, Sri Lanka had banned imports of all automobiles in the nation to conserve its finances. The country will resume imports of fully built commercial vehicles and vehicle kits, including those for light commercial vehicles, trucks, and buses.
The Finance Minister Semasinghe said that the Indian auto industry, especially manufacturers such as Tata Motors, TVS Motor, Ashok Leyland, and Bajaj Group, has been deeply engaged with the Sri Lankan manufacturing sector and the country ‘completely recognises their importance’.
India has re-extended a credit line of US$ 1 billion to Sri Lanka, which has enabled the country to buy goods and services from India.
“We want the Indian auto industry along with the electric vehicle OEMs to play a key role in the decarbonisation of the Sri Lankan economy, for which we are planning to extend special incentives on a case-by-case to reduce its reliance on fossil fuels as a top priority.
This development is likely to give a shot in the arm to Mahindra Electric Mobility Limited and other EV makers like Okaya EV which have expressed interest and formed alliances with Sri Lankan counterparts.
Mahindra Electric Mobility Limited has signed a distribution Agreement with Sri Lankan SLA Mobility (SLAML) for electric 3-wheelers, with the entity also looking for localisation or CKD operations in Sri Lanka, on introducing its EVs to the country.
The current Sri Lankan norms in the wake of the economic crisis allow imports close to 60 percent with a cap of 40 percent localisation.
Anshul Gupta, Managing Director of Okaya EV, expressed his support for the move and said, “We appreciate the support from the Sri Lankan government for a complete knock-down (CKD) assembly and are hopeful that their norms offer a substantial tax holiday that can serve as a strong incentive to establish Sri Lanka as a hub for sustainable transportation solutions.”
While Okaya EV has announced its foray into Sri Lanka and has inaugurated its first showroom in Colombo, Mahindra Electric Mobility Limited plans to export the electric Treo range and the Zor Grand vehicles to the Southern neighbour.
Sri Lanka has historically been a natural go-to market for companies like Tata Motors, which has been exporting vehicle kits to distributors in the country. Others, such as Mahindra & Mahindra, Ashok Leyland, and TVS Motors, have had a history of local assembly operations in the nation.
Auto Exports to Sri Lanka, which constituted close to Rs 2,377 crores by FY20, dropped by 60 percent to Rs 874 crore in FY22, as per industry analysts. Two-wheelers have been hit the most, with exports declining from Rs 1,244 crore in FY20 to a meagre Rs 4 crore.
When asked about restarting the two-wheeler imports along with passenger car imports, Semasinghe said that this would be possible only in the calendar year 2024, as for three years the island nation has not imported a single automobile.
“With the revival of the tourist sector, the country’s travel and tourism operators are also looking to refresh their old vehicles, including two-wheelers, which we are fully aware of. However, considering the delicate balance of the payment situation, we will take an appropriate decision as normalising ties with India, our saviour in times of distress, and supporting the country is a huge priority for us.”
From the discussions with other members of the Sri Lankan delegation that accompanied the Finance Minister, Autocar Professional learned that the country is also talking to Adani Group about participating in the unbundling of state electricity boards, and once the government passes its bill for restructuring, a decision for the same is likely to be taken.
India had extended US $4 billion in emergency assistance during the peak of Sri Lanka’s financial crisis early last year, and the country’s leading export-import bank, EXIM Bank, has said that it is pursuing many of its lenders to take a haircut on their exposure to the country.
With the island nation slowly coming out of its economic peril-like situation and its forex reserves growing by 26% to a 17-month high of US $3.7 billion in June, the government lifted import restrictions on 286 items, including auto components, but the import of cars and two-wheelers continues to be banned.
The Sri Lankan government had limited imports of more than 3,200 items at the peak of its crisis
New Delhi has extended assistance totalling more than $ 4 billion to Sri Lanka since 2022.
FACT BOX
- India has provided the Transport Board with over 75 buses manufactured by Ashok Leyland as a gesture of goodwill. In a similar move, India handed over 125 SUVs from Mahindra & Mahindra to the Sri Lanka Police to assist them in addressing severe mobility constraints caused by a lack of vehicles.
- Tata Motors, which has been running its operations in Sri Lanka since 1961, started assembly of the Tata Ace small commercial vehicles as the largest-selling commercial vehicle brand in Sri Lanka, selling 750 kg Ace to 45-tonne Prima trucks.
- Bajaj Auto exported over 30,000 units in 2019–20, and its operations are significantly pared down by post-import restrictions.
- Mahindra & Mahindra had earlier set up assembly operations in Sri Lanka with the Ideal Group to produce the KUV 100 mini sport utility vehicle (SUV) and Bolero Maxi pickup truck in August 2019.
- Mahindra & Mahindra had also set up a completely knocked-down assembly plant in Welipenna through a JV with local partner Ideal Motors.
- TVS Motors was retailing several of its two-wheeler models, such as the 100-cc economy motorcycle TVS Sport and the 125-cc scooter TVS NTORQ Race Edition, through local assembly in Sri Lanka.