'The Automobile Sector is Going Through One of the Most Difficult Times in the History'

  4 min 34 sec to read

How has been the impact of Covid-19 in automobile business of Nepal?
Prior to Covid-19 pandemic, the vehicle sales growth was very good. However, the pandemic dealt a blow to the auto mobile sector like it did to other sectors of the economy in the country. Businessmen are still struggling to overcome the impact of the pandemic. Automobile sector is no exception to that. Not only Covid-19, but its effects are also hitting the automobile sector. After the economy was reopened with pandemic subsiding, the business was getting better. But, our situation in recent time is very weak. The automobile sector is going through one of the most difficult times in the history.    

Was it recovering after Covid-19 cases started to subsidize?
After Covid-19, automobile sector was on the track to recovery. There was a good recovery. However, various policies introduced by Nepal Rastra Bank and the government have affected us the most.  While we were asking the central bank to withdraw its provision requiring 100 percent cash margin on the import of vehicles, it announced to stop opening letter of credit altogether. What could be more extreme than prohibiting automobile dealers to import vehicles and sell them in Nepali market? We are in a situation to shut our business and handover the keys to the government. It's only the automobile sector that has been affected by one after another event. Other businesses are gradually on the way to revival.

How did the government policies hit automobile business in Nepal?
Initially, it was the 50 percent down payment requirement that was problematic 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 letter of credit for the imports of cars. Later, the government decided to ban the imports of vehicles citing them as luxury goods. The government ban on the imports have halted the sales of vehicles. We feel proud of the sector that contributes highest amount of revenue. But, it looks like the government does not want its revenue to grow. The government blames depleting foreign currency reserve to the ban. If that's the case, why the ban is only for the automobile sector which contributes the revenue equal to the value of imported vehicle. If imports of other commodities of same value are not being prohibited, why is the reason to target only automobile sector?

You met Finance Minister before the budget. How was the response?
The government response was positive. Some of our demands  like facilities for manufacturing and assembling industries, establishing exhibitor center have been addressed. However, there has not been any initiative or measure to revive the automobile sector.

Why do you think the government is introducing such restrictive policies toward automobile sector?
We also don't understand the government's perception toward automobile sector. Automobiles are always categorized as luxury goods, and this sector is characterized as unproductive sector. I do not understand whether we could not change their perception or they do not want to change. Without automobile, neither industrial production can reach to the market nor raw materials can be taken to industry. The movement or travelling cannot be imagined now without automobile. If a vehicle has become a need for all, how could it become a luxury good?

Despite various incentives, there has not been any interest of investors to set up assembling plants in Nepal. Why?
An investor always looks for a long-term policy. One Finance Minister comes and introduces various tax breaks and incentives for an industry. Later, another Finance Minister brings different policy. Such policy flip-flop causes losses for an investor which has invested billions of rupees for assembling industry. So, its lack of consistent, stable or long-term policy in businesses that have discouraged investors from establishing assembling industries.

What do you think the recent voices calling for promotion of electric vehicles in Nepal?
Electric vehicles should be promoted in Nepal not only to protect environment point of view, but also to utilize hydro electricity produced in the country and stop the outflow of foreign currency. But, it's the policies on electric vehicles that are most inconsistent or instable in Nepal.  It's four times in two years that the import duties of electric vehicles have been changed. How would customers or dealers make business decisions when the government continues to change its policies that affect prices and cost.

How hopeful you are of the government lifting vehicle import ban immediately?
The government has enforced the current import ban until mid July. However, there are fears that the ban could get extended. We are organizing NADA Auto Show after two months. But, there are still fears that the import ban would not be lifted by that time. We are ready to wait until mid July. But, the current ban must be lifted after that. Until there is liquidity crisis in the banking system, we cannot expect the automobile sales to go smooth even after the government lifts the ban.

No comments yet. Be the first one to comment.