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Sri Lanka has embraced plug-in hybrids. Should India follow?

While the power and fuel situation in India is nowhere as bad as it was in Sri Lanka, there have been a lot of power cuts across the country this summer, with the electricity grid experiencing record-breaking demand.

I recently visited Sri Lanka and found its car market quite unique. The transformation of its automotive industry over the past few years offers important lessons for India and its automakers.

Until recently, most cars sold in Sri Lanka were second-hand imports from Japan. This is because Japan uses something called the Shaken system, which imposes escalating costs for older cars. This makes the average Japanese car owner trade-in their vehicle before they turn three years old. These second-hand cars are then exported to multiple right-hand drive markets across the world, Sri Lanka being a particularly favoured destination as there are heavy taxes on new car imports.

The vehicle that I had hired was one such, the Honda Fit Shuttle, which is an estate version of the Honda Jazz, but it was a hybrid variant. In fact, while I noticed some Indian-made vehicles in Sri Lanka, including quite a few Tata Nanos and Maruti-Suzuki Altos, for the large part, most vehicles were Japanese imports, including vehicles we never got in India, such as the Japan-spec WagonR hybrid or Suzuki Spacia. All cars imported to Sri Lanka have to be under three years old, so one sees contemporary Japanese models. And since Sri Lankan’s pay extraordinarily high rates of excise — between 200-300 per cent on car imports — they clearly tend to prefer reconditioned Japanese vehicles over newer Indian cars.

But one interesting thing occurred in 2025, after a near........

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