Nepal’s automobile market has hit a new speed bump after the government increased the excise duty and road construction charge on two-wheelers through the revised budget for the fiscal year 2021-22. Prices will increase from Rs15,000 to Rs50,000 depending on the engine capacity.

This latest hike in excise duty and road construction charge will impact those who were planning to purchase a two-wheeler during the upcoming festive season of Dashain and Tihar. Automobile dealers usually offer attractive discounts and schemes during this period and price-conscious Nepali buyers take advantage of these offers to buy a new vehicle. According to automobile dealers, sales of two-wheelers surge by 60 to 65 percent during this period,

As per the revised budget, the government has increased the excise duty on 125cc to 200cc two-wheelers by up to 50 percent. Before this, the government charged a 40 percent excise duty on 155cc two-wheelers and 40 percent excise duty on 155cc to 250cc two-wheelers. The 125cc to 250cc segment of two-wheelers make up the majority of sales in the country.

Similarly, the excise duty on bikes with engine capacity of 500cc to 800cc has been increased to 100 percent, a 20 percent hike from the past provision.

The government has also hiked the road construction charge on two-wheelers. As per the new provision, the road construction charge on bikes crossing 125cc is Rs15,000 per unit. Similarly, the road construction charge on 125cc to 250cc bikes is Rs18,000 while 250cc to 400cc bikes will be charged Rs50,000 per unit and bikes exceeding more than 400cc will be charged Rs100,000.

Before the hike, the road construction charges of bikes crossing 155cc was Rs15,000 per unit, 155cc to 250cc was Rs18,000, motorbikes crossing 250cc to 400cc Rs50,000 and bikes crossing engine capacity 400cc Rs100,000 per unit.

Krishna Prasad Dulal, president of Nepal Automobile Dealers’ Association (NADA) said that though the government has increased the tax on two-wheelers, it has provisioned a 50 percent waiver on the parts used by the two-wheeler assembling industry, an increase from the old 25 percent.

Dulal said, “The higher waiver will allow domestic assemblers to lower their prices and become more competitive with imported bikes.”

Dulal said that this step by the government is welcoming and also encourages other dealers to open assembly units in the country that will help in establishing industry and generating employment.

As per dealers, the prices of locally assembled bikes will not increase while prices of imported bikes will go up.

Currently, Golchha Group and Jagadamba Group assemble Bajaj and TVS motorcycles, respectively, in Nepal.

Syakar Group (Honda) and Morang Auto Works (Yamaha) are also planning to open plants to assemble two-wheelers locally.

“We cannot comment on the tax hikes that the government imposes on imported goods,” he said.

Dulal said that the tax has not been increased on two-wheelers that are mostly used by the general public. He also added that a rise in tax on two-wheelers will not impact sales.

According to the Department of Customs, the country imported two-wheelers worth Rs33.19 billion in the fiscal year 2020-21, a sharp increase of 76.91 percent as the import bill stood at Rs18.76 billion in the fiscal year 2019-20.

The country imported 208,793 motorcycles in the fiscal year 2019-20 while the number jumped to 355,959 in the fiscal year 2020-21.

According to the vehicle registration data of the Department of Transport Management, the department registered 198,062 motorcycles till mid-March of the fiscal year 2019-20 while the registration was 282,997 in the fiscal year 2018-19.

According to automobile dealers, despite a slow-down in economic activities, two-wheelers sales saw significant growth compared to four-wheelers after the lockdown was lifted last year as people opted for private transport due to the fear of contracting Covid-19 while using public vehicles.