Why Used Car Prices Remain High in Sri Lanka
Sri Lanka’s automotive market is undergoing a major change. After a long ban on vehicle imports, the gradual lifting of restrictions has created a new situation. There is a notable move away from traditional used internal combustion engine (ICE) vehicles toward new cars, especially Electric Vehicles (EVs). This article looks at current pricing trends of used cars in Sri Lanka and considers if the rise of EVs will lower the used car market.
The Current State of the Used Car Market
For years, the Sri Lankan used car market experienced artificial inflation. The import ban, imposed to address the country’s foreign exchange crisis, created a shortage of new vehicles. This led to a spike in demand for second-hand cars, pushing prices to unprecedented levels. A 10-year-old Toyota Prius, for example, could sell for double its pre-ban value.
While the government expected that lifting the import restrictions in early 2025 would lead to a price correction, the outcome has been more complicated. Prices of used vehicles, although slightly lower than their peak, have stayed relatively high due to several reasons:
- High Import Taxes: The new import policies allow vehicles into the country but still enforce heavy taxes. This includes a surcharge on customs duty, increased excise duties, and a high Value-Added Tax (VAT). These taxes significantly raise the final cost of both new and used imports, stopping a sharp drop in used car prices.
- Ongoing Demand: Despite economic challenges, there is still a strong demand for personal transport. For many Sri Lankans, especially those in the middle-income group, used cars are the only affordable option due to the high cost of new vehicles.
- Fuel Prices: Increasing fuel costs have made fuel-efficient vehicles, including older reconditioned Japanese models, popular choices, helping to keep their prices stable.
Despite these factors, it is clear that consumer preferences are changing. A July 2025 report by ikman.lk shows that used cars still dominate listings, but the market is becoming more diverse.
Will the Used Car Market Go Down with EV Imports?
The arrival of Electric Vehicles is the biggest new factor in Sri Lanka’s automotive scene. Traditional used car importers had hoped to regain their market share, but EVs and new Chinese cars are now leading the imports. This shift challenges the traditional used car market in several ways:
- Affordability:
New, affordable EVs from brands like BYD, MG, and BAW are entering the market at competitive prices, with some models priced as low as LKR 4.5 million. This makes them a viable alternative to used ICE vehicles that have become very costly.
- Lower Operating Costs:
EVs provide a strong value proposition due to their lower running costs. With fuel prices rising, the savings from using electricity instead of gasoline or diesel are significant for consumers.
- Modern Technology and Features:
New EVs offer up-to-date features, advanced safety systems, and contemporary designs, making them more appealing than older reconditioned models.
This change is already evident. The Vehicle Importers Association of Lanka (VIAL) has expressed concern about the declining demand for used Japanese vehicles, with many initial shipments going unsold. Car dealers in Colombo report that customers who used to ask about five-year-old Priuses or Vitz are now inquiring about EV charging times and battery life. This clearly shows a shift in consumer priorities, moving from traditional vehicle concerns to those focused on the future of transportation.
The Future Outlook
While the used car market is unlikely to collapse suddenly, the long-term trend points to a gradual but significant decline in the value of used ICE vehicles, especially older ones. The government’s push for environmentally friendly transport, combined with new EVs becoming more affordable and attractive, will continue to weaken the market share and pricing power of used cars.
The used car market will likely split. High-demand, well-maintained Japanese and European models will keep some value, especially for buyers who prefer traditional engines. However, the broader market will feel downward pressure on prices as more affordable and technologically advanced EVs become available. The used car market will not disappear, but its dominance is challenged, and its future pricing will rely less on artificial scarcity and more on real competition from a new electric fleet.
