Electric vehicles have captured the imagination of forward-thinking Nepali citizens. Presently, out of the approximately 15,000 automobiles sold annually in Nepal, around 1,200 are electric, signifying a growing interest in sustainable transportation options. But the government's frequently changing policies, mainly the tax rates, have been putting this sector in the ditch.
BY Newbiz team
Nepal's electric vehicle (EV) market has experienced a remarkable surge over the past couple of years. With an increasing number of consumers, businesses, and offices seeking sustainable transportation alternatives, electric-powered vehicles are quickly becoming the driving force behind Nepal's future of mobility. This growth is fueled by a surge in consumer demand and a growing commitment to sustainable transportation. As the Himalayan nation tackles environmental degradation and climate change, EVs have emerged as the catalyst for a cleaner, greener future. Consequently, Nepalis are increasingly embracing EVs as their preferred mode of mobility.
This trend of embracing the EV culture is clearly growing in the major cities of the country, where electric-powered vehicles are reshaping mobility. With the promise of reduced servicing and fuel expenses, the allure of EVs is sparking a revolution on Nepal's roads.
This shift in the driving preferences of Nepalis is vividly reflected in the import figures, which reveal an astounding 66.4% increase in EV imports during the first nine months of the current fiscal year compared to the same period last year. According to the Department of Customs, Nepal has imported a staggering 2,451 units of EV (four-wheelers) valued at Rs 6.84 billion during this period alone. This marks a substantial leap from the previous year's import of 1,473 units worth Rs 4.29 billion.
As fuel prices continue to soar, the allure of EVs in Nepal is evolving beyond a mere trend. It has become a transformative movement that holds the promise of a greener and more sustainable future for transportation.
"Yes, Nepal's EV market is experiencing significant growth. In fact, it has emerged as the fastest-growing market in entire South Asia in recent times," Dhruva Thapa, President of the NADA Automobile Dealers Association of Nepal, said.
According to data compiled by the Department of Customs, EV imports have experienced a significant surge. However, manufacturers and suppliers are still struggling to keep pace with the soaring demand. Remarkably, for FY 2022/23, the tax rates for EVs with a capacity of up to 100 kW include no customs duty. Only a 10% excise duty, 13% VAT and 5% road development tax are levied on EV. Likewise, the tax rates for EVs brought for public transportation also remained the same. However, for EVs with a capacity ranging from 100 to 200 kW, a new set of taxes was introduced, comprising a 30% customs duty and an additional 30% excise duty.
As per the provisions outlined in the Finance Bill 2022/23, EVs with capacity ranging from 200 to 300 kW face a hefty tax burden amounting to 90% of their purchase price. This tax structure includes a substantial 45% customs duty alongside an equivalent excise duty. Furthermore, EVs surpassing the 300 kW attract 60% customs duty and excise duty, translating to an astronomical 120% tax based on the import price. VAT and road development tax are applicable to all kinds of vehicles. Despite the government's decision to increase taxes, the demand for EVs continued to surge.
During the fiscal year 2021/22, Nepal saw imports of 996 EVs with capacity up to 100 kW. Additionally, a modest count of 13 four-wheeler EVs, ranging from 100 to 150 kilowatts in capacity, found their way into the country. Equally noteworthy, a significant influx of 792 electric cars, jeeps, and vans with a capacity ranging from 150 to 200 kilowatts was observed. However, the import of EVs with a capacity exceeding 200 kilowatts remained relatively scarce, with only four units making their way into the country.
In 2021/22, the total value of EVs imported into the country amounted to an impressive Rs 5.29 billion. Notably, the government reaped substantial revenue from customs and excise duties, with a total of Rs 1.42 billion generated.
Due to a substantial hike in tax rates on EVs in the budget for the fiscal year 2020/21, EV imports experienced a temporary setback. However, with a subsequent revision of tax rates, the importation witnessed a remarkable surge. In the fiscal year 2022/23, the government opted to maintain the tax rates at the same level for low-capacity EVs, while implementing increased tax rates for high-capacity EVs. Following the review of tax rates in FY 2021/22, the NADA Automobile Association of Nepal reported a significant upsurge in the demand for EVs. In fact, the overwhelming demand has led to a challenging situation for nearly all EV suppliers in the country, as they struggle to keep up with the soaring market demand.
Thapa said as the supply side constraints have been addressed, the supply of EVs has normalised. “I am not too sure about the EVs coming from countries like Japan and South Korea, but the supply of EVs from India and China is okay,” he added.
However, the tax rates announced by the government on May 29, 2023 in the budget for FY 2023/24 as this matter was going to the press, has caused another jolt to the EV market.
While the customs duty and exercise duties on entry level electric cars (50-100 KW), which are in high demand, have been increased, these have been reduced in mid-range (100-300 KW) electric cars and no changes have been made for those above 300 KW capacity.
This is criticised not only as a step to discourage the EVs, but also as favouring certain business houses against others.
Those companies that have been selling the entry level electric cars have already expanded charging stations across the country are now forced to reconsider the planned expansion as the customers now are likely to opt for petroleum cars.
Main Suppliers – India and China
India has emerged as the largest supplier of EVs to Nepal, followed by China and South Korea. In the first seven months of the current fiscal year, Nepal imported 1,435 units of EVs worth Rs 3.89 billion from India, 294 units worth Rs 643.59 million from China, and 227 units worth Rs 861.41 million from South Korea. The accessibility of affordable Indian EVs is expected to improve even further with tax exemptions announced by the Indian government, potentially making them more affordable in Nepal.
Among the best-selling EVs in Nepal are those manufactured by Tata, an Indian company. Tata's Nexon and Tigor models are particularly popular in the country. China is the second-largest exporter of EVs to Nepal, with popular brands like Neta V, BYD, MG, and TheeGo. Consumers also favour Hyundai's Kona and Ioniq models. Additionally, EVs from the USA have started making their way into Nepal.
Despite infrastructure limitations and slow progress in charging station development, the EV market in Nepal is showing no signs of slowing down. The government's vision to transition from gasoline-powered vehicles to electric ones by 2031 aligns with the growing demand for eco-friendly transportation options. As the country moves toward its green mobility drive, the rising popularity of EVs signifies a transformative shift in Nepal's transportation landscape, paving the way for a cleaner and more sustainable future.
Government’s EV Goal
The debate on replacing internal combustion engine (ICE) vehicles with EVs began years ago but gained momentum in 2015 during the Indian blockade. However, despite eight years passing, IC engine vehicles still dominate Nepal's roads, emitting smoke and pollutants. In 2018, Nepal brought the 'National Work Plan for Electric Transportation' with an ambitious goal of converting at least 20% of vehicles to at least 20% of vehicles to EVs within two years.
Unfortunately, more than four years have passed, and the government is far from achieving its target. The Department of Transport Management reports low registration numbers of EVs outside the Kathmandu Valley. Only a few electric rickshaws are operating outside the valley and are registered with the local government. Nepal aims to align with the 2015 Paris Agreement, which set a goal of ensuring at least 20% percent plying the roads are EVs. However, Nepal, like many other countries, has fallen short of this objective. Nevertheless, the encouraging growth in the EV market in recent years has rekindled hope.
The government aims to reduce reliance on petroleum products in public transportation by 50% by 2050, focusing on energy efficiency and embracing EVs. Government leaders emphasise the significant benefits of EVs for the economy, environment, and public health. Transitioning from costly imported petroleum products to domestically produced hydroelectricity will not only curb pollution but also reduce the country's foreign trade deficit. Currently, Nepal's annual fossil fuel import bill exceeds Rs 300 billion, and adopting EVs is the key to alleviating this financial burden.
While the demand for EVs is rising, challenges such as the lack of charging stations, high-interest rates, and inflation still persist. The latest tax hike is likely to further slowdown the electric vehicles market.
Advantages of Electric Mobility
Electric mobility offers numerous benefits and ensures a brighter future for the nation. Firstly, EVs play a pivotal role in reducing vehicular emissions, leading to a remarkable improvement in overall air quality, particularly in cities like Kathmandu. Secondly, transitioning from petroleum-based fuels to electricity will result in significant savings in foreign currency expenditure. Petroleum products currently account for over 17% of Nepal's import bill, making this shift an economic boon. By reducing reliance on imported fuels, the country can redirect those funds towards empowering other critical areas, fostering economic growth and development.
Moreover, EVs can use Nepal's surplus electricity during off-peak and wet seasons. By utilising this energy instead of letting it go to waste, electric vehicles maximise the country's resources while minimising environmental impact. It unlocks the hidden potential of Nepal's power grid, ensuring a greener and more sustainable future. Lastly, when considering the cost of owning and operating an electric vehicle compared to a conventional vehicle, the financial calculations speak for themselves. Opting for an EV proves to be the financially savvy choice. Embracing electric mobility allows people to enjoy the benefits of lower ownership and operational costs, freeing up resources for other meaningful endeavours.
Individuals who have experience driving both ICE vehicles and EVs attest that the latter are significantly more cost-effective in the long run. An employee from a government office, who has been using EVs for the past eight years, stated that the operational costs of EVs are 10 times cheaper than those of ICE vehicles.
Furthermore, EV owners are exempt from paying the annual registration renewal fee. Likewise, EV users save money on regular servicing and fuel expenses. Sagar Mani Gyawali, assistant manager at the Energy Efficiency Department of the Nepal Electricity Authority, explains that driving an EV for 20,000 kilometres saves approximately Rs 200,000 in fuel expenses compared to its ICE counterpart.
Innovative Bank Financing
Financial institutions must develop innovative financing instruments to overcome the higher upfront costs of EVs compared to ICE vehicles. These instruments will make EVs more accessible and affordable, with attractive loan terms and competitive interest rates. To drive the growth of the EV market, innovative business models focused on EV sales and charging station operations are crucial. These models should incentivize EV adoption through benefits like discounts on purchases and partnerships with charging station operators.
In Nepal's federal governance structure, collaboration between the federal, provincial, and local governments, along with the private sector, is essential for promoting public electric mobility. Comprehensive strategies and cohesive policies can address infrastructure gaps, establish regulatory frameworks, and integrate EVs into Nepal's transportation ecosystem. Implementation of the National Distribution Plan is vital to meet the increasing demand for electric mobility. Enhancing the electricity distribution system, ensuring reliable supply, and installing smart metres will enable efficient energy management and attractive, cost-effective EV charging through differential electricity tariffs.
Nepal can learn from Norway's experience, where the success of zero-emission e-mobility relied on adequate, affordable and reliable electricity supply (see box). Strengthening electricity distribution infrastructure, optimising renewable power generation, and refining the tariff structure will boost confidence in accessing electricity for EVs, accelerating the transition to sustainable transportation.
In recent years, banks and financial institutions have introduced convenient and hassle-free loan schemes for EVs. In accordance with government policies aimed at promoting EV adoption, several banks have announced attractive auto loan offers. Additionally, the Nepal Rastra Bank (NRB), which previously only allowed banks to provide loans for 50% of the price of fossil fuel-driven vehicles, has now permitted financial institutions (BFIs) to invest up to 80% of the EV's price. This flexible policy by the NRB has encouraged banks to offer a variety of appealing auto loan schemes.
Policy and Tax Stability
NADA President Thapa, an enthusiastic advocate for the EV revolution, attributed the soaring popularity of EVs to a captivating combination of factors. Among these, the government's recent tax policy (i.e. of 2022/23) stands as a pivotal game-changer, providing a much-needed boost to EV ownership. Furthermore, Thapa pointed out that easier access to bank financing has allowed individuals to effortlessly embark on their electric journeys, transcending the barriers of affordability.
Above all, maintaining a steadfast and unwavering policy stance on EVs by the government seems to be of paramount importance. Drawing from past experiences, it can be said that there is a need to refrain from capricious decisions that may result in exorbitant tax hikes for EVs. In particular, the government should learn from past mistakes and refrain from burdening EVs with oppressive tax rates.
Consistency is the key when it comes to nurturing the burgeoning EV industry. By avoiding impulsive measures and preserving the current tax rates, the government can establish a foundation of stability and reliability, fostering an environment where EV manufacturers and consumers alike can confidently invest and thrive.
Deepak Thapaliya, the general manager of Hyundai Nepal, the distributor of Korean-made cars in Nepal, echoes these sentiments. Thapaliya acknowledged that the current demand for EVs may not have fully blossomed organically and is still intricately intertwined with price fluctuations. He believes that the pricing dynamics of EVs are primarily influenced by government policies.
Thapaliya asserts that the sustainability and trajectory of EV growth are intrinsically linked to the stability of the government's policies concerning EVs. Should the government maintain a resolute and unwavering stance on EVs, coupled with the continuation of favourable tax rates, the growth of the EV market will flourish unabated, he added.
The stability and predictability of policies have a direct impact on pricing, thereby influencing consumer behaviour and the overall growth potential of the market. Therefore, it becomes imperative for the government to maintain a steadfast commitment to EVs, fostering an environment conducive to sustained growth and propelling Nepal's transition towards a greener and more sustainable future.
51 Charging Stations to Come Online by June
The Nepal Electricity Authority (NEA) has announced plans to launch 51 fast charging stations in the next month. Out of the total, NEA has already constructed 40 stations and will complete the installation of the remaining 11 within the specified deadline. The project, which was initially announced two years ago, faced delays due to the Covid-19 pandemic. However, NEA has confirmed that the infrastructure is now in its final stages of construction, with an additional 11 stations planned to be installed by June.
The growing demand for electric vehicles (EVs) driven by concerns about climate change has highlighted the need for more charging stations in Nepal. Import of EVs has increased by 66.39% in the first nine months of the current fiscal year. Currently, 60 DC fast chargers and 300 AC chargers are available nationwide. NEA aims to establish one charging station every 60 kilometres along major highways and collaborate with the private sector to install a total of 500 stations by the end of the next fiscal year. However, private sector stakeholders argue that the 20% cap on charging prices set by NEA will impede profitability.
Lessons from Norway
Norway's global leadership in electric mobility provides valuable insights for Nepal. Despite their differences, both countries share significant reliance on hydropower and face similar challenges and opportunities due to their mountainous topography. In 2022, an impressive 79.3% of new car sales in Norway were EVs. This success is attributed to visionary government policies and a dynamic roadmap, the Norwegian Transport Policy, shaped through extensive stakeholder engagement.
Fiscal incentives have been instrumental in Norway's EV uptake. The government incorporated a carbon dioxide (CO2) component into the annual vehicle tax, resulting in higher taxes for internal combustion engine (ICE) cars. The tax exemption for zero-emission vehicles, coupled with a 25% value-added tax exemption for EVs, provides compelling financial advantages. Norway extends support beyond financial incentives, offering perks like toll charge exemptions, access to bus lanes, reduced parking fees, and distinct licence plates for EVs. These incentives create an appealing environment for individuals considering the switch to electric transportation.
Recognising the importance of a robust charging network, Norway has made significant strides in expanding infrastructure, boasting over 25,000 charging stations in 2022, including over 6,000 fast-charging units. The government's plan aims to install two fast-charging points every 50 kilometres along major roads for convenient charging accessibility. Norway's commitment to electric mobility extends to strengthening its electricity distribution grid to accommodate the growing EV charging demand. The promotion of smart metres, combined with differential electricity tariffs, effectively manages peak-time distribution system overload.
History of Electric Mobility in Nepal
Nepal's e-mobility journey began in 1979 when the capital city of Kathmandu introduced an electric trolley bus system with assistance from China. This ambitious project aimed to revolutionise transportation but unfortunately ceased operations after three decades in 2009 due to political and bureaucratic mismanagement. Despite this setback, the spirit of innovation persevered.
In 1995, Nepal saw a glimmer of hope with the introduction of locally manufactured 12-seater battery-powered electrical three-wheelers known as ‘Safa tempos’. These environmentally friendly alternatives replaced the polluting diesel-operated three-wheelers, affectionately known as ‘Vikram tempos’." Today, a resilient fleet of approximately 700 Safa tempos continues to serve the people, providing a cleaner and greener mode of transportation.
The turn of the century brought a new chapter in Nepal's e-mobility landscape with the arrival of electric four-wheeled vehicles. Although still in their nascent stage, these vehicles have captured the imagination of forward-thinking Nepalese citizens. Presently, out of the approximately 15,000 automobiles sold annually in Nepal, around 1,200 are electric, signifying a growing interest in sustainable transportation options.
Not to be outdone, the bustling streets of Kathmandu are now home to four public electric buses, silently gliding through the cityscape. These emissions-free buses offer a glimpse into the future of public transportation, showcasing the potential for a cleaner, quieter, and more harmonious urban environment.
Prices of Indian EVs Likely to Drop
If you've been eyeing an Indian EV, this year might just be the perfect time to make your purchase. Recent developments indicate that the prices of battery-operated vehicles manufactured in India are expected to decrease in the Nepali market. This positive shift is a result of the Indian government's decision to eliminate import taxes on certain products used in the production of EVs.
To promote exports, boost domestic manufacturing, and increase domestic value addition, the Indian government has waived taxes on several inputs through the budget for the fiscal year 2023/24. These tax exemptions are predicted to bring down prices of various Indian goods in Nepal, including EVs, according to local traders.
During the budget presentation in the Indian parliament, Indian Finance Minister Nirmala Sitharaman announced a continuity of the concessional duty on lithium-ion batteries for another year.
Similarly, in the pursuit of greener mobility solutions, the 2023-24 Indian budget also extended customs duty exemption on the import of capital goods and machinery required for manufacturing lithium-ion cells used in electric vehicle batteries. This commitment to green mobility is likely to have a ripple effect on neighbouring countries such as Nepal.
EV sellers in Nepal acknowledge the positive impact these tax exemptions will have on the prices of Indian EVs in Nepal. They anticipate a decrease in production costs in India, which will ultimately lead to a reduction in the price of electric cars for consumers in Nepal. However, they suggest that it may take some time for customers to benefit from these reduced rates, as a new batch of vehicles needs to be produced first. However, the latest tax changes in Nepal are likely to disturb this expectation.
Some Popular EV Choices in Nepal
As the world moves towards a sustainable future, electric vehicles (EVs) are becoming increasingly popular as people are switching to a cleaner and more sustainable mode of transportation. EVs are much better for the environment as they produce zero emissions while driving, which means you'll be helping to reduce air pollution and combat climate change. EVs are becoming increasingly affordable and widely available in Nepal with several options to choose from, including the Tata Nexon, Hyundai Kona Electric, and MG ZS EV. These vehicles offer a range of features and prices to fit a variety of needs and budgets. Switching to an EV is a smart choice for anyone who wants to save money on fuel and maintenance costs, reduce their environmental impact, and enjoy a quieter, smoother ride. There are several great options available to choose from here in Nepal.
1. BYD All-New E6: The BYD All-New E6 is a five-seater electric crossover SUV manufactured by the Chinese automaker BYD Auto. The BYD e6 was first introduced in 2009 as an all-electric crossover, while the BYD all new e6 is a redesigned and updated version of the original e6 model. The car features a 71.8 kWh battery pack that can be charged in as little as 90 minutes using a DC fast charger. The car has a range of up to 520 km on a single charge, making it one of the longest-range electric vehicles available in Nepal. The car's motor capacity is 70 kW, and the cost of this car is around Rs 5.9 million.
2. Hyundai Ioniq 5: The Hyundai Ioniq 5 is an all-new electric crossover SUV introduced for the 2022 model year. It is the first model in Hyundai's new Ioniq sub-brand and is built on a dedicated electric vehicle platform. The car features a high-capacity battery pack and an efficient electric powertrain, providing a range of up to 480 km on a single charge. The Ioniq 5 has an augmented reality head-up display, a 12.3-inch digital instrument cluster, and a large 12.3-inch infotainment touchscreen. The cost of this car is around Rs 11.6 million.
3. Tata Nexon EV: The Tata Nexon EV is a subcompact SUV with an impressive range of up to 312 km per charge. The car comes with a 30.2 kWh lithium-ion battery that can be charged up to 80% in just 60 minutes using a fast charger. The car features advanced safety features such as hill descent control, ABS with EBD, and a reverse camera. The spacious interior and comfortable seating make it an ideal family car, while the modern features such as a touchscreen infotainment system and automatic climate control add to the overall driving experience. The cost of this car is around Rs 3.8 million to Rs 4.2 million.
4. Hyundai Kona Electric: The Hyundai Kona Electric is a subcompact SUV that boasts an impressive range of up to 449 km per charge, making it one of the most practical EVs available in Nepal. The car features a spacious and well-designed interior, with comfortable seating for up to five passengers and a generous amount of cargo space. The Kona Electric is also equipped with advanced safety technologies such as lane departure warning, automatic emergency braking, and a rearview camera. The car has a top speed of 167 km/h and costs around Rs. 6.056 million to 6.296 million.
5. Nissan Leaf: The Nissan Leaf is a compact hatchback that is widely regarded as one of the pioneering models in the mainstream electric vehicle market. The car features a range of up to 243 km per charge, making it ideal for daily commuting and short trips. The Leaf boasts a spacious and comfortable interior, advanced safety features, and user-friendly technology such as a touchscreen infotainment system. The cost of this car is around Rs 6.5 million.
NADA Automobile Association
"EVs for Public Transportation aren't Much Affordable"
The current situation of EVs is good. What do you think will be the future?
In fact, among South Asian countries, Nepal has a high growth rate for EVs. However, there are no stable policies regarding EVs. In two years, the number of EVs has increased up to four times. If this trend continues, NADA forecasts that in the next five years, the growth rate will exceed 50% in the passenger segment. This is not quite possible for the commercial segment because it is expensive and not so affordable in Nepal. However, this trend is likely to break if the government increases the tax, as it has happened in the past. The growth rate was good in past years, but since the government hiked the tax, the growth rate went down.
What is the status of production in the global market?
There is no problem now. All the existing companies are producing EVs. There are hundreds of new startups. There was a global shortage of some spare parts of EVs for some time, so there was no proper supply. But the situation has become better now, and all models are sufficiently available in Nepal.
Is the demand being met, or do buyers have to book and wait for 6-7 months?
There is no such condition now. Some models imported from South Korea or Japan may take time, but those brought from India and China are distributed on time and are in stock.
Lack of enough charging stations on highways is seen as a major problem. How much has this affected?
Charging station infrastructure is as important as engine mechanics. We have become self-sufficient in mechanics and technicians. Even if there are 50,000 EVs, we have arranged manpower and trained technicians within 3-4 years. But the infrastructure development that should be done by the government has not been completed as promised. NEA had promised to build fast-charging stations in 50 places, but it has not been completed to date.
However, the private sector has installed charging stations in 58 places in one year. In all other countries, the government does all of these. We are ready to do it on our own, but the government should give us incentives. The profit margin is very low at the moment. The operation cost of one station is Rs 5-6 million for equipment only, and there is no return. The government should be serious about this. EVs are still not the first priority. About 75% of those who buy EVs have bought it as their secondary vehicle. Those who already have IC engine cars and are buying EVs for shorter distances. To make it their first priority, they should be distributed to smaller municipalities.
Which is the most popular motor capacity among Nepalis?
The government has given a discount on duty for vehicles with a capacity below 100 KW only. We have been saying for a long time that vehicles with a capacity below 100 KW, IC vehicles below 1500 cc, and motorcycles up to 200 cc are basic needs. Vehicles that cost Rs 20-40 million should be considered luxury, and we don't see any problem in taxing them. However, vehicles should also be made for middle-class groups, especially since private vehicles have become a need due to the poor condition of public transportation. Just like how mobile phones were considered a luxury before but have now become a need, vehicles have become needs too.
What is the condition of EVs for public transportation?
EVs for public transportation aren't quite affordable. There is a possibility for microbuses, but they are quite expensive for mass transportation with 50+ seats. They cost around Rs 15 million. The rate has been reduced due to the competitive market, but unless the rate is reduced to Rs 7-8 million, there seems to be no possibility. But for microbuses, they have started operating.
There are complaints that EVs are very expensive. Why is that?
In Nepal, EVs are, in fact, cheaper. We can say so in comparison to other vehicles. For example, a Tata Nexon with an IC engine costs Rs 4-4.2 million, and Nexon EV costs around the same. But in India, EVs cost almost twice as much as IC engines. However, here in Nepal, because the government has prioritised and made EVs duty-free, they are cheaper. The duty is only 10%, with 13% VAT and road development charges, which is why they are more affordable.
How is the demand for hybrid vehicles?
There was demand in the past, but now, there is no demand for hybrids as EVs have become more intriguing. The technology of hybrids is advanced, and the spare parts are really expensive too. Hence, the future of Nepal is EVs. The only reason for promoting EVs in other countries is to reduce pollution. But in the case of Nepal, we have our own hydroelectricity, and it also reduces pollution. The import of diesel and petrol will also be reduced. There are also voices heard that the revenue collection of the country is affected by the import of EVs and that the tax should be increased. But we shouldn't only look at revenue; EVs have many positive effects, be it in environment conservation, maintenance costs, or hydroelectricity.
What are your expectations of the new budget?
In 2018/19, only 235 EVs were imported. In 2019-20, that number rose to 575. However, due to increased duty, the number of EVs imported in 2020/21 decreased. But in 2021/22, 1540 EVs were imported, bringing the total to 2,416 units. The import of IC engines, on the other hand, has been declining. It was 14,000 in 2018/19, but it dropped to around 10,000 units in 2019/20 and then to around 8,000 in 2020/21. The Covid-19 pandemic affected the import in 2020/21 and 2021/22. The import was banned for nine months which also affected the numbers. However, imports have resumed now. If we look at the ratio, EVs are at 55% and IC engines are around 45%.
Demand for EVs is Yet to Become Organic
There is this talk about replacing ICE vehicles with EVs which are getting popular as well. What do you say?
I believe we should carefully consider proportionality and determine the appropriate ratio between ICE vehicles and electric vehicles (EVs). It is crucial to establish a suitable ratio based on our current needs and priorities. In my opinion, a balanced ratio representing both segments would be fitting for our country. Although I recognise the potential of EVs, they are still in an experimental phase, and their overall sustainability needs further validation in various aspects. Therefore, we should avoid hastily increasing the proportion of EVs or solely relying on ICE vehicles with an immediate adoption ratio. It is important to note that we are not as developed as China or European countries, and our infrastructure still faces several constraints to fully depend on a single type of powertrain.
The demand for EVs, particularly four-wheelers, in Nepal has increased significantly. What is your assessment of this growth, including the major reasons behind this growth?
There is no doubt that the demand for EVs has significantly increased. However, if we evaluate the trend in the long run, we can observe ups and downs. This is because the attraction towards EVs is based on their price rather than their actual features. For instance, when the government provided price subsidies in 2019, the demand for EVs increased significantly. However, the demand went down when the government imposed taxes on them the next year. The demand went up again when the tax was removed. Therefore, the demand for EVs is not yet organic and solely dependent on price fluctuations.
Can you explain the current market situation of EV in Nepal?
Recently, when we first started, the market composition of EVs accounted for only 3%. At that time, when 12,000-13,000 passenger cars were distributed, EVs only contributed 3%. Subsequently, the market share increased to 6%, but then it dropped down to zero before rising up again to 8%. Currently, as of 2023, it stands at around 28% in terms of market share, which is a significant increase from the earlier times.
How is the demand-supply situation now?
Following the Covid-19 pandemic, global demand and supply were disrupted, affecting not only Nepal but also other countries. Taiwan experienced a shortage of semiconductors and chips, which had a global supply impact. The high demand for EVs exceeded the available supply due to this shortage. Fortunately, the situation has improved now. However, the current economic crisis has led to a substantial decline in product demand in Nepal. As a result, suppliers have adjusted their supply to align with the reduced demand.
There is a general complaint – EVs are expensive. What do you say?
Indeed, EVs can be expensive compared to ICE vehicles. Excluding taxes, the manufacturing cost of EVs is generally higher, primarily due to the cost of lithium-ion batteries. In the international market, these batteries can cost as high as $250 per kilowatt, and when a minimum 40-50 kW battery is used, the battery cost alone can range from $12,000 to $15,000. Additionally, the inclusion of motors and various electronic components contributes to the higher manufacturing cost. On the other hand, ICE vehicles benefit from cost minimization through mass production and the utilisation of well-established technologies. Consequently, EVs are generally pricier and often associated with luxury vehicles. For example, the Hyundai Kona is more expensive compared to the Tucson. It is important to note that the higher price of the Tucson is primarily due to taxes, which are levied and paid to the government.
How tough is the market competition?
Market competition benefits consumers by fostering competition in supply and pricing. It is worth mentioning that there are affordable EV options available. However, it is important to consider that certain EVs have been imported without proper regard for safety parameters and quality checks. Some manufacturers produce cheaper EVs by cutting down on research and development expenses. Despite these factors, the market faces strong competition, particularly from China, which has achieved self-sufficiency in EV production. Given Nepal's proximity to China, we observe the influence of their strong EV market in Nepal.
The government claims to have adopted a policy to promote EVs. But has it translated these words into action?
First, political instability and inconsistent taxation policies have created an unfavourable environment. Second, the current classification of EVs for import duties lacks scientific basis. As per general undesrtanding , the cost of an electric vehicle is primarily determined by the battery, yet in our country the motor is being used as the basis for customs duty categorisation which appears unscientific to me. The government should recognise this and find some more better way of categorisation either price, battery, or any thing else which is more scientific so that the objective behind the categorisation can be acheived too. In regards to DC fast charger, the government needs to be aware of the proportion of EV adaption in Nepal now. Considering this 50 charging stations have been planned to install throughout the country and 40 have been set up already. But considering this adaptation of EVs recently, even 500 charging stations will not be sufficient in 5 years, this will ensure revenue generation for the government and create a sustainable environment for EVs to thrive. Additionally, the government should reassess their plans for charging stations and consider increasing their number to meet the growing demand for EVs.
What are your expectations from the new budget for EVs?
Political stability and effective planning are essential for progress. The government must consider the potential consequences of its actions and make decisions based on sound judgement, prioritising long-term benefits over popularity. Scientific categorisation and taxation systems should be emphasised to prevent document manipulation and foster healthy competition.
What is your assessment of the situation of infrastructure to support EV transportation?
Charging stations are not the only infrastructure needed for EVs; there are other types of infrastructure, such as roads. When en route, people save money on fuel costs, but stopping to charge their vehicle takes time. Additionally, the environment of the charging station, where one may have to wait for an hour or more, is also considered part of the infrastructure
Can you share with us in brief Hyundai Nepal’s experience so far in the country’s EV market?
We had a great start with EVs. We introduced the Hyundai Kona Electric and installed around 50 AC chargers. However, when we started this journey, we faced a major challenge with manpower. Most mechanics were more familiar with ICE vehicles, so we had to train them to work with EVs. We invested a significant amount of time in the comprehensive development of our infrastructure and software. I am proud to say that Hyundai has successfully balanced all these aspects, and our backend preparation is excellent. We have certified professionals, and we also provide training to individuals at our own training institute.
We have two variants available: the Ioniq 5 and the Kona. Currently, we have sold around 600 units of these models. The Kona, being a hatchback, has been more popular among our customers. On the other hand, the Ioniq 5 used to be a popular premium level EV choice in previous years before the implementation of high taxes. Many customers used to consider it a good value for money option.
How do you see the market over the next five years?
The market conditions appear to be favourable due to the current prices. However, if the government imposes high taxes on EVs, their costs will inevitably increase. This would result in ICE vehicles being viewed as more affordable. As I mentioned previously, there needs to be a proper balance, and I believe that a respectable ratio for both powertrains would be appropriate. The next five years may be challenging due to political instability, but I see promising years ahead.