As the global automotive industry shifts gears toward electrification, Southeast Asia has emerged as a hotbed for electric vehicle (EV) innovation and production.
Thailand, the region’s automotive powerhouse, is leading the charge, aiming to convert 30% of its annual vehicle production, roughly 2.5 million units, into EVs by 2030.
Thailand in particular, is set to become Southeast Asia’s largest EV market this year, with a projected 40% surge in sales, driven by strategic endeavours from Chinese automakers.
In 2024, Chinese automobile manufacturer Great Wall Motor (GWM) committed 22.6 billion baht, roughly $ 673 million towards EV production, components, and infrastructure development, in Rayong, Thailand.
In the year before, Chinese multinational automaker Build Your own Dream’s (BYD) Atto 3 SUV captured 31% of the market, within a year of its launch, outperforming other competitors within its local market.
Meanwhile, Sri Lanka, a nation still grappling with economic recovery, is sitting on a potential goldmine: High-purity graphite, a critical component in EV batteries. With global demand for graphite projected to grow at a compound annual growth rate (CAGR) of 10% from 2023 to 2030, and the global EV battery market projected to surpass $ 98 billion by 2028, Sri Lanka has the potential to leverage its graphite resources.
However, the country must move beyond raw material extraction.
Institute of Policy Studies (IPS) Research Fellow Asanka Wijesinghe suggests that component production, such as anode materials or processed battery-grade graphite, is the most economically viable option of exports, at present.
“With strategic investments, Sri Lanka could even explore battery pack assembly, tapping into the growing EV ecosystems of East Asia,” he said, speaking to The Daily Morning Business.
To date, on a global scale, China dominates the EV anode market, producing nearly 90% of the world’s battery-grade graphite. In 2025, this monopoly has raised concerns about supply chain resilience, with the US actively seeking to diversify its graphite sources, citing national security and sustainability concerns. Sri Lanka, with its untapped reserves of high-purity graphite, could gain to position itself as a source of reliable alternative.
Acknowledging the progress Sri Lanka has made in the more recent past with the signed Sri Lanka-Thailand Free Trade Agreement (FTA), Wijesinghe said that Sri Lanka must move ahead to deepen its trade integration with regional players by participating in frameworks like the Regional Comprehensive Economic Partnership (RCEP).
“The recently signed Sri Lanka-Thailand Free Trade Agreement (FTA) is a step in the right direction, but broader participation in frameworks like the Regional Comprehensive Economic Partnership (RCEP) could be transformative.”
However, Wijesinghe also cautioned about the challenges Sri Lanka faces in joining the EV value chain. “Sri Lanka’s mining sector faces inefficiencies in licensing and environmental clearances, as high royalty fees and taxes deter investors,” he noted.
“The country’s logistics performance also lags, with import times significantly higher than regional competitors.”
Addressing these issues requires immediate policy reforms, from streamlining bureaucratic processes to investing in digital infrastructure like a National Single Window (NSW) for trade facilitation.
Sri Lanka only recently launched its digitised NSW platform at the beginning of the year, in compliance with the World Trade Organisation’s requirements, ratified by Sri Lanka as a signatory of its Trade Facilitation Agreement signed in 2017.
In 2025, the European Union’s Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation (EUDR) are set to reshape global trade dynamics, emphasising the need for sustainable practices and traceability. While the CBAM does not immediately affect Sri Lanka, as the country does not export any products on the CBAM list, future expansions could pose challenges.
“If the CBAM is expanded or the energy source of production is accounted for, Sri Lanka will face difficulties,” Wijesinghe explained. “In that case, Sri Lanka has a huge incentive to increase the contribution of renewable energy to its national energy mix.”
The EUDR, which requires product traceability, could also impact Sri Lankan exports like coffee and cocoa. “Producers must be able to track the origin of their products back to specific land plots to ensure compliance,” Wijesinghe added.
To attract investors into green mining, Sri Lanka must comprehensively map its graphite resources and streamline licensing and environmental clearance processes. “Sector-specific tax relief is crucial,” Wijesinghe said.
“Currently, high royalty fees and taxes reduce the return on investment, discouraging further investments in the sector.”
Immediate policy changes are also needed to support the EV industry. Conversely, while Sri Lanka may not be able to develop a full manufacturing value chain from mining to battery production in the medium term, it can still focus on exporting battery-grade graphite or processed components.
“A reduction in value-added tax on domestically assembled vehicles could help kick-start the industry,” Wijesinghe suggested.
For EU investors, preferential access to the ASEAN market could make Sri Lanka an attractive destination.
“If Sri Lanka can offer preferential access through FTAs, producers will move here to benefit from that,” Wijesinghe said.
Trade facilitation remains a critical area for improvement. “Establishing a National Single Window (NSW) is a priority,” Wijesinghe emphasised. “Digitising customs and border procedures will also boost the country’s logistics performance.”
Free Trade Agreements (FTAs) with ASEAN countries could further enhance Sri Lanka’s export potential. “FTAs help remove the anti-export bias by aligning incentives for export and import-competing industries,” Wijesinghe explained.
“They also open doors for sustainable products like eco-friendly apparel, which is in growing demand among ASEAN’s affluent consumers.”
Given the shift of global markets towards greener and more sustainable products, Sri Lanka is necessitated to align its export strategy with these trends.
The Inflation Reduction Act (IRA) in the US, which excludes Chinese EVs from subsidies, presents both opportunities and uncertainties for a Sri Lanka that could possibly enter the value chain.
“Increased geopolitical tensions could force firms to diversify away from China,” Wijesinghe noted. “Sri Lanka must position itself as an attractive alternative.”
“A trade war could divert trade toward competitors like Sri Lanka, but the negative impact on global markets cannot be ignored,” Wijesinghe warned. “In the long run, joining value chains in the RCEP region will be beneficial.”
As Sri Lanka navigates these complexities, one thing is clear, it has a unique opportunity to plug into the global EV revolution. However, its success will depend on bold policy reforms, strategic investments, and a commitment to sustainability. “The world is moving toward greener and more sustainable products,” Wijesinghe concluded. “Sri Lanka must move with it, or risk being left behind.”