Due to the increasing trade deficit and shrinking foreign reserve of Nepal, the government has finally taken the step to completely ban the import of the 10 product categories labeled as “Luxury” items. These list of goods comprises of products such as cars, vans, and motorcycles with an engine capacity of more than 250 cc, liquor, mobile sets worth more than $600, color television sets larger than 32 inches, diamonds, cigarettes and tobacco products, toys and playing cards and ready-to-eat snacks like potato chips. This move has questioned the country’s policies on foreign trade.
Specifically talking about the automobile industry, almost 7% of the country's imports are covered by the foreign vehicles. In recent years, the living standard of people has grown tremendously which has increased their purchasing power and access to automobiles. It makes it easier for everyday people to purchase vehicles which have driven up imports to fulfill the growing demand. The government has been blaming the automotive industry as a major contributor to depleting foreign exchange reserves and the liquidity crisis in the banking sector. In order to save the country’s foreign reserve and balance the trade deficit out, the automobile import industry has been made to pay a heavy amount. Just recovering from covid’s impact on the regular sales of vehicles and coming back on track, the government has yet again closed the major sources of improvement and income in the automobile industry. The import ban is levied on vehicles above the engine capacity of 150cc to 250cc as per the new import ban policies.
In contrast to this policy, the import of Completely Knocked Down Units are not obstructed which includes the vehicles that are assembled in Nepal. The government is also providing support to local production and manufacturing plants. Customs duty of only 1 percent will be levied on parts and raw materials used in manufacturing electric three-wheelers and two-wheelers in a bid to promote domestic production of electric vehicles. Along with that, if the two-wheeler company attains a Letter of Credit (LC) dated before July 17, 2022, they are not restrained from importing the 150cc to 250cc vehicles.
Companies such TVS, Yamaha, Honda, Husqvarna, KTM, Benelli, Crossfire and more are facing a hard time as majority of the bike models available are above the quoted engine capacity. One major concern of the NADA Automobiles Associations of Nepal, is the NADA Auto show that is coming pretty soon. The import ban will have a heavy impact on the organization's motives and plan for the future of the Nepali Automobile Industry.
This ban has been estimated to extend till the end of August 2022, but its practicality can be questionable.