Maruti Suzuki is Considering an Assembly Plant in Sri Lanka

The Sri Lankan government recently increased the customs duty on imported cars from 120% to 200% in order to promote local manufacturing. The heavy import duties started hurting Indian car manufacturers especially Maruti who has a market share in the island nation worth mentioning.

Out of 29,000 new cars sold in Sri Lanka in the last financial year, 15,000 were Maruti Suzuki cars as Sri Lanka ranks among the top export destinations for the automaker. In November, Sri Lankan government raised the ‘minimum accessible price’ from

A senior Maruti official told Financial Express that, “We are assessing the need of setting up a completely-knocked down (CKD) plant in Sri Lanka since increased duty rates will affect our sales there this fiscal.”

Maruti is reportedly considering an investment in a CKD assembly plant with annual capacity of 30,000 units. However, getting the localization levels to 40% as required by the Sri Lankan government’s local assembly norms would prove to be a challenge.

If Maruti sets up a plant in Sri Lanka, it would be its first expansion outside India and also Maruti will become one of the first manufacturers to set up a shop in Sri Lanka. Chinese automaker Geely has already proposed an assembly plant in the country with local partner Micro cars.

With 10% of total auto exports from India destined to Sri Lanka, other Indian manufacturers like Tata and Mahindra could also consider assembling cars there in the future.