In the first seven months of 2012 registration of brand new and reconditioned cars slipped to 18,376 units from 31,462 compared to the same period last year.
Earlier in the year Sri Lanka slapped new taxes of as much as 100 percent of import value on some imported cars, but raised taxes on hybrid cars at a lower rate in a move to ease congestion on roads, cut fuel costs and to reduce the import bill amid a deepening balance of payment crisis.
According to data from Sri Lanka's Department of Motor Traffic, registration of smaller cars below 1000cc engine capacity has dropped to 7,343 in the first half of 2012, compared to 12,432 registrations in the same period last year.
Industry officials estimate new vehicle registrations may drop up to 40 percent in 2012 and dreams of motor bike owners to move on to small cars will be shattered.
Motor trade officials say a state import duty hike has sent prices of smaller cars (below 1000 cubic centimeter engine capacity) like the Indian-made Maruti