Consumers purchasing small four-wheeler electric vehicles (EVs) in Nepal are benefiting from an average indirect tax subsidy of Rs 4 million in line with the country’s current tax policy, according to a new World Bank report released on Tuesday.

Citing an unpublished internal study, the report highlights that electric four-wheelers face a significantly lower tax burden than their internal combustion engine (ICE) counterparts, making EVs more affordable and competitive in the Nepali market.

Under the existing tax regime, small ICE vehicles are taxed at a total rate of 247% on their cost, insurance, and freight (CIF) value, while comparable EVs are taxed at only 30%. If EVs were subjected to the same tax rates as ICE vehicles, their average retail price would rise from Rs 2.41 million to approximately Rs 6.43 million, the report stated.

Nepal’s tax incentives for EVs — including reduced import duties and excise taxes — are part of a broader national strategy to encourage the use of domestically generated hydropower, lower petroleum imports, and reduce air pollution and carbon emissions. These measures have effectively narrowed the price gap between EVs and conventional vehicles, particularly in the sub-50-kilowatt segment.

For instance, a typical 1000cc ICE vehicle has an average post-tax price of Rs 3.06 million, with taxes accounting for about 71% (Rs 2.18 million). In contrast, a similarly sized EV (up to 50 kilowatts of power) costs approximately Rs 2.41 million, with just 23% of that amount attributable to taxes and fees.

According to the World Bank, Nepal’s current tax structure has enabled EVs to compete successfully with petroleum-powered vehicles, helping to accelerate the country’s transition toward cleaner and more sustainable transportation alternatives.