Automobile sales during Dashain buying binge fall below forecastsSales have been decreasing after Nepal Rastra Bank put a cap on auto loans, dealers say.
Automobile sales during the Dashain buying binge fell below forecasts due to tightened car loans, vehicle dealers said. Sales were down 20-25 percent from the previous year.
Potential car buyers usually wait for the Dashain festive season to make their purchases as dealers offer discount schemes and unveil new models during this time. The festive season accounts for almost 50 percent of annual sales.
“This year we missed our target despite revising down our sales forecast from last year,” said Bibek Bahadur Balami, sales and marketing manager at United Traders Syndicate, authorised dealer of Toyota four-wheelers.
According to dealers, auto sales have been decreasing for the last two years after Nepal Rastra Bank put a cap on auto loans through the monetary policy for fiscal 2018-19, calling motor vehicles a luxury and the auto industry an unproductive sector.
With the trade deficit ballooning out of control, the government also levied high duty on vehicles to minimise imports, improve the balance of payments situation and cut the trade deficit.
According to Nepal Rastra Bank’s statistics, vehicles and spare parts accounted for Rs97.5 billion out of the total import bill of Rs1.41 trillion in 2018-19.
The government adopted stern measures to dissuade banks from providing high-risk auto loans in a bid to check the import of luxury goods and prevent them from engaging in aggressive lending with loanable funds running short.
Last November, the government revised the loan-to-value ratio on auto loans for private vehicles to 50 percent from 65 percent. Following the move, customers have to make a 50 percent down payment. Previously, they had to pay just 35 percent of the value of the vehicle up front.
According to dealers, more than 80 percent of four-wheeler buyers depend on bank loans, and this has put off potential customers. “The 50 percent down payment rule has made people drop their plans to buy four-wheelers,” said Balami.
The central bank’s records show that auto imports plunged 20.3 percent year-on-year during the period mid-July to mid-August.
Automobile dealers hold the NADA Auto Show just a few weeks before Dashain in a bid to lure buyers during the festive season. Bookings and sales used to jump during the NADA Auto Show previously, but this year the fair lacked energy, according to the NADA Automobiles Association of Nepal.
Balami said the lacklustre mood did not liven up even during the festival. According to him, the new government policy impacted high-end vehicles more than entry level cars.
Rupesh Sharma Bhatta, deputy general manager of Laxmi Intercontinental, the authorised distributor of Hyundai, said that sales of medium-priced vehicles were not affected much during the festival despite a fall in sales of high-end cars.