Sri Lanka Customs has seized thousands of BYD Atto electric vehicles after discovering inconsistencies in motor capacity declarations, potentially exposing early buyers to massive tax penalties. The incident reveals deep flaws in EV tax policies and enforcement.
Sri Lanka Customs has confiscated close to 1,000 Chinese-made BYD Atto electric vehicles over alleged underreporting of motor capacity, raising alarm among importers, early buyers and tax officials. This mass seizure has exposed glaring gaps in the country’s vehicle import policy and the way electric vehicle duties are calculated.
According to officials, six shipments of BYD electric vehicles arrived in Sri Lanka over just two days this July and have since been placed under detention by Customs. The controversy centers on discrepancies in the stated motor power ratings that directly affect the amount of tax levied on each car.
The official documents submitted to Customs declare that each vehicle’s motor capacity is 100 kilowatts. However, authorities suspect these vehicles are actually equipped with motors rated at 150 kilowatts. This distinction is more than just technical; it determines the amount of tax that must be paid when importing the vehicle.
In Sri Lanka, a 100kW electric vehicle is subject to a tax of Rs 2.4 million. In contrast, a 150kW model carries a hefty Rs 5.4 million tax burden. If a vehicle with a higher capacity is declared as having a lower one, the resulting tax shortfall could reach Rs 3 million per car. Moreover, a customer who unknowingly purchases such a vehicle might later be asked to pay as much as Rs 4 million more, according to internal sources.
In traditional combustion engine vehicles, multiple engine capacities are often offered within the same model, such as 1300cc, 1500cc or 1800cc. But with electric vehicles, even if two variants share the same physical motor, it is possible for manufacturers to limit or tune down the motor output based on the market. This makes regulatory enforcement murky and enforcement policies inconsistent.
An official source said that over 1,000 vehicles have already been sold and delivered to customers in Sri Lanka before the Customs seizure occurred. This raises serious concerns over the financial liability now facing end users, many of whom were unaware of the tax classification discrepancies at the time of purchase.
The BYD Atto 3 is sold with varying motor capacities depending on the country. In Singapore, for instance, the same vehicle is sold with a 100kW rating to qualify for Category A certification. The Straits Times reported that Tesla employed a similar strategy for its Model Y RWD, lowering the motor power from 255kW to 110kW for the Singapore market.
The performance implications of reduced motor ratings are significant. The 100kW version of the BYD Seal takes 10 seconds to go from zero to 100 km/h, whereas the 150kW variant can do it in just 5.9 seconds, according to reviews from OneShift.com. In essence, a reduced power rating means a slower car, but potentially much lower taxes.
A spokesperson from JKCG Auto, the official BYD distributor in Sri Lanka, defended the variations by stating that BYD manufactures cars with multiple configurations depending on market regulations. He pointed out that the 100kW variant is not unique to Sri Lanka but is also sold in other countries like Singapore and Nepal.
Earlier this year, the issue of how tax policies vary based on engine output came up at a session of the Public Finance Committee in Parliament. Officials, including Arukgoda, confirmed that complaints had been received and an investigation had been launched. “We are aware that we have initiated an investigation into two models,” he said at the time.
It was also discovered that some vehicles were imported as used units from countries that only sell 150kW versions, triggering further scrutiny. These grey-market imports have become a flashpoint in the debate over inconsistent tax application and policy loopholes.
The controversy has laid bare the chaos within Sri Lanka’s electric vehicle taxation system. The issue is not just about a few cars being misclassified but points to a lack of regulatory clarity on how to define and measure electric motor output. The absence of clear rules on whether a de-rated motor is acceptable has opened the door for ambiguity, manipulation, and now, massive financial liability.
It is critical that Customs and all relevant regulatory bodies establish transparent and consistent rules for determining motor capacity in electric vehicles. A framework must be put in place to resolve how to handle vehicles that have already been cleared and sold under questionable classification.
Failure to address this issue quickly and decisively could erode trust in the electric vehicle sector and jeopardize Sri Lanka’s broader goals of embracing sustainable mobility. For now, however, early BYD buyers find themselves trapped in a bureaucratic nightmare that could cost them millions.
