Auto loans are back as cash crunch eases and import ban endsAccording to the Nepal Automobile Dealers’ Association, nearly 90 percent of car buyers take auto loans.
Automobile dealers and commercial banks have relaunched their financing schemes after more than a year as the liquidity crisis has eased and the import ban on cars has been lifted.
Vehicle sellers say they expect sales to pick up with the resumption of auto loans while bankers say that the cash crunch has diminished to some extent.
Dhruba Thapa, president of the Nepal Automobile Dealers’ Association, says sellers have started making agreements with banks to provide easy financing.
“The improvement in the liquidity crisis has come as a relief for both customers and auto dealers,” said Thapa.
According to him, banks continued to issue loans for electric vehicles (EVs) while the scheme was suspended for gasoline-powered vehicles. “Now, financing for non-electric vehicles has resumed after the government lifted the import ban,” he said.
Automobile dealers have long been demanding that the financing margin for non-electric vehicles be raised. Currently, banks provide a 50 percent financing facility for non-electric vehicles. For EVs, banks provide loans that cover 80 percent of the purchase price of the vehicle.
Pioneer MotoCorp, the authorised distributor of Nissan vehicles in Nepal, and Nabil Bank recently signed a memorandum of understanding (MoU) on the financing of Nissan vehicles, both electric and non-electric.
Nabil Bank will provide up to 80 percent financing for Nissan electric vehicles for individuals and up to 70 percent for institutions.
The bank will provide up to 70 percent financing for non-electric vehicles for institutions and up to 50 percent for non-electric vehicles for individuals.
Similarly, Shangrila Motors, the authorised distributor of Peugeot and Citroen vehicles in Nepal, and Everest Bank have signed an MoU to collaborate on vehicle financing.
Everest Bank will provide up to 80 percent bank financing for electric vehicles, up to 70 percent financing for non-electric vehicles for institutions, and up to 50 percent bank financing for non-electric vehicles for individuals.
Automobile dealers say that the collaboration with banks aims to offer easy retail financing for customers wishing to purchase vehicles.
“Banks are focusing on electric vehicles for long-term benefit from the environment perspective as this will reduce fossil fuel imports which are a major reason for the country’s widening trade deficit,” said Sunil KC, president of the Nepal Bankers’ Association.
KC, who is also CEO of NMB Bank, said that the liquidity crunch in banks had also started to lessen. “Banks have accorded priority to EVs. Regarding the financing margin for non-electric vehicle, it’s the prerogative of banks,” he said.
NMB has also been prioritising financing for electric vehicles at preferable interest rates, KC said.
Last April, the government imposed import restrictions besides ordering importers to maintain a 100 percent margin amount to open a letter of credit.
The directive issued on April 26, 2021 embargoed 10 types of goods described as luxury items. They included, among other things, mobile sets worth over $600, motorcycles of over 250cc capacity and all non-electric vehicles.
The mid-term review revealed that stopping imports to save foreign currency had led to low revenue collection.
Taxes on the import of gasoline-powered vehicles are a key contributor to the nation’s treasury. Imports of petrol vehicles plunged by 91.7 percent, resulting in a drop in tax collection by 92.36 percent.
Imports of diesel vehicles fell by 33.65 percent, resulting in a drop in tax collection by 18.08 percent.
According to the Department of Customs, Nepal imported fuel worth Rs227 billion in the first eight months of the current fiscal year ended mid-March compared to Rs217.30 billion in the same period of the last fiscal year.
The country imported petroleum products worth Rs383.92 billion in the last fiscal year 2021-22.
Vehicle imports plunged by 56.99 percent to Rs32.65 billion during the review period.
The import of electric vehicles swelled by 55.38 percent to Rs6.16 billion in the first eight months of the current fiscal year, customs data show. Nepal imported 2,198 electric vehicles in the first eight months of the current fiscal year compared to 1,357 units in the same period of the last fiscal year.
Nepal has been importing electric vehicles mostly from India, China and Korea. The soaring cost of gasoline has helped boost EV sales. Industry insiders say EVs are gaining popularity and market share in Nepal even though fuel prices are now trudging backwards.
According to the Nepal Automobile Dealers’ Association, nearly 90 percent of car buyers take auto loans.