Nepal to switch to light electric vehicles by 2031 as fossil fuel import balloonsThe government wants the world’s 10 electric vehicle manufacturing companies to set up plants in Nepal. There is no reason for them to come, industry insiders say.
“For the manufacture and assembly of electric vehicles, companies of the world's top ten brands will be attracted to set up their plants,” said Finance Minister Bishnu Prasad Paudel while presenting the annual budget on May 29.
Tax subsidies would be offered and land on lease would be provided to make Nepal attractive for such companies, he said.
The idea may be wonderful but whether it is feasible is an entirely different matter.
“There are simply too many challenges,” said Krishna Prasad Dulal, president of Nepal Automobile Dealers’ Association.
Industry insiders say the goal is not realistic and that the government has not really done anything so far apart from making statements.
According to Ramesh Dhaneku, marketing communication manager of Morang Auto Works, authorised distributor of Yamaha two-wheelers and Skoda four-wheelers, there is very little possibility that any international EV (electric vehicles) maker would think of entering a small market like Nepal.
“Nepali automobile market is small and it requires huge investment to set up such a plant,” he told the Post. “Even if the plant is set up to export EVs, the company needs to compete with giant Indian and Chinese markets.”
“Therefore, it is a lofty idea,” Dhaneku said.
Around 15,000 units of automobiles are sold in Nepal annually. Of them, sales of electric vehicles, which are more expensive than those running on fossil fuel, stand at 1,200 units.
“The demand may increase, if the electric vehicles get assembled inside the country, to nearly 2,000 units annually at present rates,” Dhaneku said. “But such sales won't be enough even to recover the cost of production.”
As most of the top electric vehicle brands have their assembling and manufacturing units in India, they will be manufacturing in India rather than coming to Nepal, according to him.
“The cost of production is very low in India; so why would they come to Nepal?” he said.
Dulal, however, sounded more optimistic as he said Nepal should promise a bumper offer to attract top electric carmakers.
“If the government creates a conducive environment for investment, there is the possibility of attracting international EV makers,” Dulal told the Post.
At present, Golchha Group and Jagadamba Group have been assembling Bajaj and TVS motorcycles, respectively, in Nepal.
Shyakar Group and Morang Auto Works are also planning to open plants to assemble two-wheelers—Honda and Yamaha.
Besides, businesses involved in the auto trade or even EVs said that regulatory mechanisms to do business in Nepal are not supportive.
“There are lots of procedural hassles,” admits Dhaneku.
According to the Doing Business Index of the World Bank group, Nepal ranks 94 among 190 countries.
Finance Minister Paudel also said that Nepal plans to shift from light vehicles that run on petroleum products to electric ones by 2031 and announced a strategic plan to lower fuel imports and the concomitant pollution.
Nepal imported petroleum products worth Rs215.76 billion in the fiscal year 2018-19, although this figure dropped to Rs163.70 billion in 2019-20 due to Covid-19-related restrictions that kept vehicles off the roads and brought factories and development projects to a halt for nearly four months from March to July last year.
According to a report of the Central Bureau of Statistics released in 2019, Nepal’s gasoline consumption almost doubled in the last five years, leading to a yawning trade deficit besides having consequences to the environment.
Nepalis consumed 90 percent more fuel than they did five years ago and petroleum products are the largest single imported commodity in terms of value every year.
The country’s demand for petroleum products has been increasing by 10 percent annually despite regular supply of electricity, officials of Nepal Oil Corporation, the state-owned monopoly, said.
Paudel’s claim of shifting to electric vehicles aside, the government is planning to build more pipelines to import petroleum products.
Nepal plans to lengthen the petroleum pipeline from Amlekhgunj, Bara to Lothar, Chitwan, and up to the Kathmandu Valley in the near future.
A team from the Indian Oil Corporation, which built the Motihari, India-Amlekhgunj pipeline as a gift to Nepal, also conducted a survey for a potential pipeline from Siliguri, India to Nepal Oil Corporation's depot at Charali, Jhapa.
The initial survey has shown that 35 km of the pipeline will be in the Indian territory and 15 km on the Nepal side of the border. These are long-term fuel import policies and require billions in investment.
Meanwhile, many countries, including neighbouring India and China, have announced dates to phase out vehicles that run on non-renewable resources.
The Indian government aims to make India a 100 percent electric vehicle nation by 2030. It has proposed that two-wheelers below the engine capacity of 150cc sold in the country after March 31, 2025, and three-wheelers sold after March 31, 2023, should be run on electricity.
China has announced an ambitious plan to require all new car sales in 2035 to be either hybrids or new-energy vehicles.
In contrast, Nepal’s import of vehicles—most of them running on petrol and diesel—has been increasing.
According to the Trade and Export Promotion Center, the country imported vehicles and spare parts worth Rs82.43 billion in the first 10 months of the current fiscal year 2020-21, up 38 percent compared to the same period last fiscal year.
The country imported vehicles and spare parts worth Rs91.16 billion in the fiscal year 2018-19.
In the current fiscal year, there is 60 percent to 120 percent of excise duty on electric vehicles.
But the budget for the fiscal year 2021-22 has abolished excise duty on import of electric vehicles and reduced customs duty from 40 to 10 percent to increase the internal consumption of electricity and to promote the use of environment-friendly means of transportation.
The new provision will have a price differential of Rs1 million to Rs3 million depending on electric motor capacity of the vehicle and this will increase the use of electric vehicles, according to automobile dealers.
In line with Paudel’s announcement, government officials say preparations for the implementation of all provisions announced by the government to facilitate the entry of electric vehicle manufacturers are underway.
According to Jiblal Bhusal, director general at the Department of Industry, in order to increase the use of electric vehicles, the government, with the participation of the private sector, will build 500 charging stations in Kathmandu and other cities across the country. Nepal Electricity Authority has already awarded the contract of setting up 50 charging stations in major cities.
Bhusal said they have started preparing for the implementation of all provisions announced by the government to facilitate the entry of EV makers.
“The government has announced tax waiver, customs waiver and subsidy, and administrative facilitation for such companies willing to enter Nepal,” Bhusal told the Post. “A working committee will be formed to formulate and implement policy to shift light-weight vehicles operated on fuel to electric vehicles by 2031.”
But environmentalists say rather than focussing on attracting international manufacturers to Nepal, consumption of electric vehicles in the country needs to be promoted first.
For one, public transport could be promoted to shift to electric buses, said Bhusan Tuladhar, an environmentalist.
“This would also decrease fuel consumption and air pollution,” he told the Post.
As for the manufacture of electric vehicles, much needs to be done, according to him.
“The government does not have any detailed road map for it,” he said. “The government should prepare a detailed long-term financing plan, institutions to promote electric vehicles and detailed plans of manufacturing.”