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Auto Industry Policies in Nepal

With the ever unstable government and their fluctuating policies with regards to the basic amenities for the citizens, we have not seen a constant phenomenon that governs fair and justifiable tax rates and policies. This is a rather sensitive topic to have a debate on but one can pour their views right??
The Government of Nepal has been making special changes and amendments on the policies that govern how the major industries of the nation operate in order to benefit all parties involved. The automotive industry; especially the vehicle importing industry of Nepal, is rather large. It is estimated that the vehicle import industry and businesses amount to almost 30% of Nepal government’s revenue in the form of excise duty, custom duty and vehicle taxes. Recognizing the above stated fact, we can make a vague connection between the Nepal Government, the auto industry of Nepal and the government policies impacts on the following. Vehicle Import in Nepal
Import Vehicles consist of various two-wheelers and four-wheelers that are imported to Nepal. These automobiles enter Nepal through various countries all around the globe through official and authorized dealers and importers. There are over 19,000 passenger vehicles that are sold to the buyers every year in Nepal. From which almost every vehicle is imported to Nepal.

“The Vehicle Import in Nepal is an estimated 17 Billion Rupees industry.”

It may only amount to a percent of all imports that are made in the nation, but it is one of the most crucial industries that binds the automobile dealers, the Nepalese buyers and the Nepal government together.

The vehicle importing businesses had seen their worst days and are still facing controversies and disagreements with the new fiscal budget as well as the new policies for the import duties. The April 2022 import ban on the 10 luxury tagged goods had temporarily made the import activities of vehicles like cars, jeeps and two-wheelers above 250cc created a chaotic market scenario. The market was stunned to witness this sudden policy application that left many
business owners, specially the vehicle dealers out of business.

In an interview with the President of NADA Automobile Association of Nepal; Mr. Dhruba Bahadur Thapa, he stated how the government's unstable policies have impacted the import industry. Initially, the 50 percent down payment requirement was a problematic policy for the automobile sector. After that, the central bank introduced a policy requiring 100 percent cash margin in the imports of vehicles. Then, the central bank restricted banks from opening letters of credit for the import of cars. Later, the government decided to ban the imports of vehicles citing them as “luxury goods” as per the April 2022 Import-Ban. The government blames depleting foreign currency reserves for the ban. It is concerning that the government targeted the automobile industry from facing the impacts of the depleting foreign currency reserve. This has made families think of buying a mobility vehicle as the second largest investment that they have to make after a housing facility.
Automobile Policy 2023. Is it still not just?

“The Automobile dealers are still not satisfied after the Import-ban was lifted. The policies are still not in their favor.”

The 8 months long import-ban was finally lifted in December 2022, with many parties at loss and protests faced. The Import-ban lift is unfortunately not enough for the dealers. There was a reigning impact on the dealers image in the international market. Because the dealers were barred from importing any vehicles from the manufacturers, the 1-2 month procedure of acquiring the letter of credit and the delivery was delayed and not accepted after the Nepalese dealers were out of the market for the 8 month ban period. This has made the current imports difficult for the dealers and the demand for these “luxury” tagged vehicles is not fulfilled.

The government of Nepal, according to the officials at NADA, wrongly chose the automotive industry of Nepal as a reason for lower foreign currency reserve, which also led to reduced revenues in the 8 month import-ban period. Even after this scenario, the Vehicle Tax rates remain unchanged. The imported raw materials and parts for automobiles are subject to a whopping 25% custom duty. The four-wheeler excise duty ranges from 75% to 105%, which is still progressively increasing. The two-wheelers are subject to excise duty ranging from 40% to 100%, which is also expected to remain unstable. The revised Vehicle Tax rates for the year of 2078/79 has not seen much improvement that would be beneficial to the dealers and the buyers. The government is further implementing restrictive policies against the automotive industry which has led to fewer and fewer vehicles in the showroom.

Electric Vehicle Tax in Nepal
The other most debated and talked about segment of the automotive industry is the electric vehicle industry in Nepal. The most outrageous amount and rates of custom duty and excise duty are levied on the more environment friendly options to mobility. The entire globe is progressing towards the modes of green transport and ethical mobility. Unfortunately, the moves taken by Nepal Government in the context of Electric Vehicles seem to be rather discouraging for the conscious buyers.
The budget presented by the Finance Minister; Janardan Sharma slapped 30 percent excise duty on vehicles fitted with 100-200 kW motors. A 45 percent excise duty has been levied on the import of EV’s equipped with motors of 201-300 kW capacity and a 60 percent excise duty has been slapped on EV’s with a motor capacity of more than 300 kW. Consequently, EV prices have always been at the peak and consumers have positioned the Electric Vehicles as “actual luxury” items. As an example to how the prices of EV’s have increased now:

“The Hyundai Ioniq-5, once priced at Rs 8.2 million, has increased to Rs 10.6 million.”

This has directly impacted sales. Despite a rise in inquiries for EVs among its popularity in the market, sales conversion is very low. This is due to lack of loanable funds with banks in the current scenario.

“The EV tax policies and rates have changed 4 times in this fiscal year.”

This simply shows how the government is unsure on either making the electric vehicle industry an easily accessible industry or a luxury tagged business that will not portray the true potential of Electric vehicles. This puts the future of electric vehicles in Nepal at stake. We as consumers cannot expect a steady change. We cannot imagine if Nepal will ever become a green nation.

Will green transportation replace the automotive industry? Will the policies support the transition? Or Will this even happen?


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