IntelScoops

COLOMBO – August 5, 2025

Sri Lanka has responded cautiously to a formal request by the United States to allow duty-free imports of American vehicles, including electric vehicles (EVs), amid ongoing bilateral trade discussions, senior officials confirmed this week.

The request, raised through diplomatic channels earlier this year, was aimed at facilitating U.S. market access for its automotive and clean energy sectors as part of a broader economic cooperation agenda. It comes at a time when Colombo is also seeking enhanced trade concessions from Washington, including the reinstatement of a 20% apparel tariff reduction under a revised Generalized System of Preferences (GSP).

According to high-level sources familiar with the discussions, the Government of Sri Lanka has conveyed that it cannot immediately agree to duty-free access for American vehicles but is open to exploring a phased implementation framework.

“This isn’t something we can commit to overnight,” a senior trade official told the press under condition of anonymity. “We’ve indicated that we are willing to look at the proposal seriously and in stages, taking into account local industry interests and fiscal implications.”

The request is being viewed by some observers as a potential soft condition tied to broader U.S. trade engagement in the Indo-Pacific region. However, Sri Lankan authorities have not publicly linked the vehicle access proposal to the apparel concessions or any other formal trade deal.

Trade analysts say Washington’s push for duty-free access to its EVs could be part of a strategic effort to compete with rapidly expanding Chinese electric vehicle brands in South Asia, particularly BYD, which has made significant inroads into the Sri Lankan market over the past two years.

Despite concerns raised by some in the local automotive industry, officials clarified that no ban or restriction on non-American EVs — including BYD — is being contemplated.

“There is no question of ending access to BYD or any other brand,” the official added. “Our focus remains on creating a balanced, competitive environment that supports green mobility while safeguarding national revenue interests.”

Analysts expect any major policy shift to be preceded by further Cabinet-level discussions and possibly a public consultation period. Meanwhile, the U.S. Embassy in Colombo has not commented publicly on the request.

The developments come as Sri Lanka ramps up its efforts to modernise its energy and transport sectors, with an ambitious goal of transitioning to 30% electric vehicle usage in urban areas by 2030.

More clarity is expected in the coming months as trade negotiations between the two countries continue.