Assembly industry fears ecosystem disruption from CBU import policy

• Cautions complete ecosystem developed by the industry risks being threatened if unregulated imports are allowed 
• Urges the government to implement a fair and competitive tax structure to ensure a level playing field between locally assembled vehicles and CBU imports

Sri Lanka’s Local Assembler’s Association, has raised concerns over the government’s decision to resume imports of completely built units (CBUs) from February next year. 

The association, representing over 17 local assembly plants producing motorcars, SUVs, motorcycles, electric three-wheelers, light trucks, and heavy trucks, warned the move could undermine the progress made by the local assembly industry during the import ban.

“The advancements made over this period will be lost,” the association said, adding that the complete ecosystem developed by the industry could be threatened if unregulated imports are allowed. 

The government had suspended vehicle imports for nearly four years as a measure to address the country’s foreign exchange crisis but recently announced plans to lift the ban.

The association highlighted that local component manufacturers had recruited over 5,000 technically qualified employees, including students and on-the-job trainees, during the suspension, significantly contributing to Sri Lanka’s human capital development. Additionally, the industry has indirectly created over 10,000 jobs in the past five years.

It noted that another key achievement has been the development of a domestic component manufacturing sector capable of scaling processes to international standards. 

“This growth has enabled major brands to set up operations in Sri Lanka, promoting the country’s technical capability on the world stage,” the association said. 

These brands include Hyundai, Mahindra & Mahindra, TATA, Lanka Ashok Leyland, and DFSK for four-wheelers, and TVS, Bajaj, and Hero for motorcycles.

The industry has further ambitions, with plans to export vehicles and two-wheelers within the next five years. The association projects component exports to increase from US$ 800 million to US$ 2 billion, creating an additional 45,000 jobs.

The Local Assembler’s Association urged the government to implement a fair and competitive tax structure to ensure a level playing field between locally assembled vehicles and CBU imports.

Drawing parallels with countries such as Morocco, Thailand, Mexico, South Africa, and Turkey, the association emphasised the potential for Sri Lanka’s assembly industry to drive significant economic benefits. These countries have leveraged strategic advantages, including location, government incentives, and robust supply chains, to develop thriving local assembly industries.

“A thriving local assembly industry not only contributes to GDP and job creation but also enhances the country’s industrial image, attracts further foreign investments, and fosters technological and economic growth,” the association said.