Driven by Demand

  15 min 31 sec to read
Driven by Demand

The demand for cars and SUVs has soared in Nepal in recent years. More and more Nepalis are riding cars, thanks to their rising income, easy bank financing and expansion of road infrastructures across the country.  
--By Sanjeev Sharma
The Nepali passenger vehicle market has registered a staggering growth. The market of cars and sports utility vehicles (SUVs) has been growing fast in recent years and new passenger vehicle brands have entered the country. Customers from various income groups are buying different types of four-wheelers which have ultimately started new segments of cars and SUVs in the domestic market. With the rise in disposable incomes of Nepalis, cars and SUVs have become a symbol of class status among Nepali customers. Importers, meanwhile, are seen busy introducing new vehicles of various designs and features to fulfill the demand of their customers. "Having a car is no more a luxury. It is now a necessity. More and more people are upgrading from not having a vehicle to vehicle now-a-days," opines Akash Golchha, Executive Director of GO Automobiles, the authorised distributor of Ford vehicles in Nepal.  
Robust Market Growth
In the past few years, the Nepali passenger vehicles market has achieved robust growth in terms of sales of cars and SUVs. Multiple factors are contributing to the growth of the market. The rise in income is seen as the key element, whereas, expansion of road networks across the country is another factor. Similarly, increased financing of banks and financial institutions in automobile purchase has also significantly supported the sales of passenger vehicles. The country's fast growing middle and upper-middle classes who are desperate to upgrade their ownership of two-wheelers to four-wheelers so as to achieve a safe and comfort ride, are the main drivers for the robust growth, dealers say. 
"Nepali automobile sector is rapidly growing. Roads are expanding and tracks have opened in all 75 districts of Nepal. The automobile business has also made its presence in the newer rural markets which is quite commendable," says Sekhar Golchha, President of Nepal Automobile Dealers’ Association (NADA). It is difficult to find the exact growth rate of the Nepali passenger vehicle market due to the lack of proper research. But auto dealers put the annual market growth rate to be somewhere between 10 to 20 per cent. "The growth is somewhere around 15 to 20 per cent per year," assumes Bibek Bijukchhe, CEO of Vishal Group-Automobile Division, the authorised dealer of Volkswagen cars and SUVs for Nepal.  
Surging Import 
Despite the high customs duties imposed on the import of automobiles, government statistics show that the demand for cars and SUVs of various segments remains very strong in the domestic market. According to the data published by the Trade and Export Promotion Center (TEPC), automobiles worth Rs 24.71 billion have been imported during the first six months of current fiscal year. "If this trend continues, the automobile import will reach up to Rs 48-50 billion by the end of the FY," predicts Krishna Raj Bajgain, Senior Officer at Trade Statistics and Analysis Section of TEPC. In FY 2013-14, automobiles worth Rs 40.30 billion were imported. 
Shant Raj Batas, CEO of Batas Organisation, the authorised distributor of Fiat vehicles in Nepal, makes similar projections. "The domestic automobile market has achieved tremendous growth in the last two years. About 10,000 vehicles are making entry into the Nepali market annually. The trend will continue in 2015 as well. Due to the high demand, the Nepali automobile market has has logged about 50 per cent growth in the first quarter of this year compared to the same period of 2014," he says. 
TEPC statistics show that the import of cars, SUVs and vans has risen significantly over the past two years. The five-year data provided by the TEPC, however, indicates a fluctuating trend in the passenger vehicle imports. 
The import of cars, SUVs and vans which was recorded at Rs 6.28 billion in FY 2009-10 declined to Rs 4.71 billion in FY 2010-11 before falling to Rs 4.20 billion in FY 2011-12. The two years were marred by liquidity crunch in the country's financial system; the bank and financial institutions had tightened their financing in various sectors including the lending in automobile purchases. The corresponding years of 2012-13 and 2013-14 saw a sharp rebound in the imports of passenger vehicles after the amount of liquidity in the financial system rose to new heights. Despite the stronger US Dollar that makes the import of automobiles expensive, data from the first-half of the current fiscal year hints that Nepali passenger vehicle market is on a track to exceed the imports of the previous two years. Nepal has already 
imported over Rs 4 billion worth of cars, SUVs and vans during the first six months of FY 2014-15, according to TEPC. 
Similarly, data maintained by the Department of Transport Management (DoTM) on the registration of vehicles also points to surge in the registration of cars, SUVs and vans.  The number of registration which was 9,595 in FY 2012-13 increased to 11,372. During the first seven months of the current FY, the office logged the number of passenger vehicles at 7,963.
Importers say that the passenger vehicle segment holds a large portion of the country's overall automobile market. "Passenger Cars solely dominates the market share with 57 per cent followed by 27 per cent of utility vehicles and 16 per cent of vans," notes Karan Chaudhary, Executive Director of CG Motocorp, the authorised distributor for Maruti Suzuki cars in Nepal. 
Small Cars Racing Fast 
The Nepali passenger vehicles market is dominated by small cars. Almost all auto dealers agree that the current market growth is largely driven by the huge demand of smaller car segments. Hatchback and compact cars have become the favorites among the Nepali customers. The first-time buyers of cars are seen buying hatchbacks before going to larger segments, namely the sedans and sports utility vehicles (SUVs).  "The hatchback holds almost 80-85 per cent of the overall passenger vehicle market and other segments share the rest," informs Rajan Shrestha, COO of Sipradi Trading, the authorised dealer of Tata Motors for Nepal. 
Affordability and ease of driving are the major reasons for the immense attraction of Nepali customers towards hatchbacks. Hatchbacks are budget cars with the body configuration having a rear door that swings upward to provide access to a cargo area. According to Shrestha, the cost factor is the major reason for this as the customs duties are very high on the imports of vehicles. "The 'B' class cars are less expensive. Hence, they are affordable to middle-class buyers," he says, adding, "Our roads are narrow and there is a lack of ample parking space, it is easier to drive and park the hatchbacks." Despite their less powerful engines, these economy class cars are easy to maintain while also being easy to drive and park.  “Hatchbacks and mid-sized sedans are widely preferred due to the suitable geographic terrain, price brackets, city congestions, uses and practicality,” opines Karan Chaudhary of CG Motocorp. Hatchbacks ranging from Rs 858,000 to Rs 4.69 million are available in the Nepali market. 
Based on price and features, hatchbacks are divided into three categories- entry, mid and premium levels. Tata Nano, Alto 800, Alto K10 and Zen Estilo from Maruti Suzuki, Chevrolet Spark, EON, i10 ERA and Santro GL from Hyundai, Tata Indica, Perodua Viva and Ford Figo are among  the bestselling entry-level hatchbacks in the Nepali market. These cars come in different versions and variants and have different features. While the hatchback models are popular among all groups of customers, the entry-level hatchbacks have become the first choice for new buyers of cars. The entry-level hatchbacks ranging from Rs 850,000-Rs 2 million are available in the domestic market. 
Meanwhile, hatchbacks of mid and premium levels are also gaining popularity in the domestic market. These vehicles have improved engine technologies, stylish designs, added safety features and latest automobile features that attract the buyers. Polo, the hatchback manufactured by the German auto giant Volkswagen in India is one such example. "The quality of fuel in India and Nepal is the same and so is the condition of the roads. The ground clearance, the short-shifting gearbox, the suspension and other features of Polo have made it popular among Nepali customers," claims Bibek Bijukchhe of Vishal Group- Automobile Division. Generally, mid and premium levels hatchbacks are priced from over Rs 2 million to Rs 4.5 million in the Nepali market. 
Tata Vista, Ritz VDI Genus, Swift, Ertiga LXI from Maruti Suzuki, Volkswagen Golf, Skoda Fabia, Yaris Hatchback and Etios Liva from Toyota, Nissan Micra, Aveo U-VA and Beat from Chevrolet, Ford Figo Diesel, Fiat Punto, Brio and Jazz from Honda, Kia Picanto, Grand i10,  i10 MAGNA, i10 Sportz and i20 Asta from Hyundai, Mitsubishi Mirage and  Mazda 2 Hatchback are some of the well known mid and premium level hatchbacks available in Nepal. 
"Hatchbacks ranging from Rs 2-2.5 million are selling the most in the Nepali market. The car segment holds the largest market share in Nepal's passenger vehicle market. Customers' immense attraction towards the segment is borne by the fact that many of the hatchback cars can meet their business and professional standards while also being affordable," says Shant Raj Batas. 
Large Vehicles Speeding Up
The Sedan market in Nepal is also witnessing a sound growth. The large-sized stylish cars offer customers more luxury than the smaller ones and are taken as status symbols. Sedans are cars with seats for four or more people having fixed roofs that are full-height up to the rear window.  As customers climb higher in the income level ladder, they are seen buying sedans. This has led to the increased optimism of the auto dealers who are basically focused on selling sedan cars. 
"There is huge growth in the sedan segment. The growth rate has been about 50 per cent compared to the last year, says Suraj Manandhar, Business Head at M.A.W. Enterprises, the authorised distributor for Skoda in Nepal.  According to him, the new entrants in the sedan segment are affordable, and are therefore attracting buyers. Hyundai Xcent which was launched last year in the market is one such example. The car priced at Rs 2.4 million has been attracting many price-conscious Nepali customers due to its affordability. "Skoda Rapid is among the best performers in the sedan segment. We have high hopes from the car," says Manandhar. The recently launched Tata Zest which carries a similar price tag is also receiving a very good response from the customers, according to Rajan Shrestha of Spiradi Trading. 
Though the market size of sedan segment is small compared to the hatchback, the introduction of new sedans indicates the rising demand of larger cars. Mostly preferred by businessmen and top officials of banks and other corporate institutions, sedans are being liked by many others too. Powerful engine, eye-catching designs, superior stability, better safety features and attractive interiors are the selling points of sedans that offer more comfort than the small-sized ones.  Sedans starting from Rs 2.4 million to Rs 100 million are available in the domestic market. Ford Fiesta Classic, City, Civic and Accord from Honda, Corolla LX and Yaris Sedan from Toyota, Tata Manza, Mazda 6 and Fiat Linea are some of the sedans popular among Nepali customers. 
SUV Market Getting Stronger
In recent years, the SUV market, too, has been increasing its foothold in Nepal. The large-sized vehicles with ample space for the passengers is getting popularity among those who want superior power, tougher built design, better safety features and macho style in their vehicles. Often equipped with four-wheel drive systems, SUVs are preferable vehicles for both on-road and off-road travels. These vehicles can roll through rugged terrains where it is impossible for hatchbacks or sedans to go. "SUV market is growing as people always have an aspiration of owning such vehicles. In recent years SUVs have become affordable and more Nepali customers are choosing SUVs over other types of passenger vehicles," opines Bardan Basnet, Senior General Manager at Agni Incorporated, the authorised dealer for Mahindra vehicles in Nepal. Mahindra, an Indian brand, is well-known for its SUV lineups such as Bolero, Scorpio and Xylo. According to Basnet, the level of competition in the SUV market is not as high as in the entry-level cars and hatchbacks.  "However, in recent years, most automobile companies have come up with their SUVs. We may observe a good competition in the SUV market in the near future," he adds. In the Nepali market, SUVs ranging from Rs 2.5 million to Rs 27 million are available. 
Customers' Shift
Customers in recent years have been shifting to higher engine capacity and large hatchback cars as they offer more power and space. "Three-four years back, 800-1000 cc car segment was the largest. In the past two years, the 1200 cc hatchback segment has become the biggest," says Akash Golchha. The shift has also been because of the new safety features of the vehicles. Due to the the expansion of road infrastructure coupled with the traffic mismanagement, road accidents are also happening frequently across the country. For this reason, today the customers analyse the safety features before they buy a particular passenger vehicle. "First-time car buyers go for just buying a car to ride, whereas, those who already own a car are looking for vehicles with safety features such as side impact beams, airbags, anti-lock braking system and two-point or three-point belt system," observes Batas. 
Market Race
Stiff competition is being observed in the domestic car and SUV market in the recent years. As the market is expanding rapidly across the country, companies are finding themselves in a tight race. The competition has ultimately resulted in the entry of new car brands that are hoping to tap the booming business. Ford, Chevrolet, Maruti Suzuki, Toyota, Honda, Skoda, Mahindra, Hyundai, Tata, Kia, Mazda, Volkswagen, Mitsubishi, Nissan, Subaru, Daihatsu, Perodua, Proton and Ssangyong are considered major contesting car and SUV brands in Nepal.  The relatively newer entrants Fiat and Datsun have also entered the race. 
To grab a slice of the market share, companies are increasingly engaged in promotional activities. Many of them are seen announcing various lucrative market offers such as cash discounts, exchange offers, zero per cent EMIs on purchases, free service camps along with free test rides of newly launched cars and SUVs and free accessories and goodies with the purchase of vehicles.  Such activities of auto dealers are backed by strong media campaigns. Meanwhile, openings of the state-of-the-art showrooms and service station across the country also show that dealers are also competing in after sales services. 
The NADA Auto Show held every year since 2006 has also become a prime platform for the vehicle brands to showcase their latest products. The show which draws a large crowd of buyers and enthusiasts is now considered a major event in the domestic auto market.
Upcoming Launches in 2015
The hot market competition has led auto dealers to gear up for new launches in 2015. The market which has seen some big launches earlier this year, will witness some high-end cars and SUVs for the rest of the period.  Ford Mustang, a widely popular coupe across the world, is among the hotly anticipated cars to be launched in Nepal. Though the price has not been fixed yet, Aakash Golchha of GO Automobile informed that the car will be launched by the end of this year in Nepal. According to him, the company is also planning to launch new compact cars. Meanwhile, Touareg Exclusive SUV, Scirocco sports compact coupe and the new Beetle car are the lineups from Volkswagen to be launched this year. Similarly, Batas Organisation will be launching Fiat Avventura crossover in the domestic market. According to the company CEO Shanta Raj Batas, the car is likely to be priced between Rs 3-3.5 million. The company also plans to introduce Jeep vehicles and the globally popular high-end compact car Fiat 500 by 2016. 
Likewise, Sipradi Trading is planning to launch upgraded version of Tata Safari Storme SUV while also introducing Tata Bolt hatchback which is scheduled for launch in May. The domestic passenger market in 2015 will also see the entry of three sedans and one SUV from Skoda- Octavia, New Superb, European Rapid and new version of Yeti. Maruti Suzuki Alto K10 is also among the hatchbacks to enter the Nepali market in 2015. Laxmi Intercontinental is gearing up for some exiting launches this year. The company will be introducing Hyundai Elite i20 hatchback, Elite i20 crossover and a compact SUV. In this launch race, Sharda Group will be introducing the seven-seater Datsun Go Plus in Nepal in family wagon segment. The Director of the company Sandeep Kumar Sharda informed that the car would be priced around Rs 2.5 million in Nepali market. 

No comments yet. Be the first one to comment.