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Challenges in Nepal’s Automobile Industry

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Nepal has come along a long way in the automobile sector. Rana Prime Minister Juddha Shamsher Rana introduced vehicle for the first time in Nepal on B.S 1958. Later on it takes professional turn on B.S 2017. Automobile sector provides a very important input to the national economy through its job generating capacity for its unskilled, skilled and semi skilled labors. It can contribute to the upmost to boost country economy if taken seriously. It is a good source of tax revenue.

However, the development in automobile is very sluggish. It has been 3 decades of establishment of Nepal Automobile Dealer Association, it hasn’t flourished yet. This is because government has not focused on developing infrastructure for automobiles. It’s necessary to reduce the hefty excise duty imposed on the import of automobiles. In addition, increase in fuel costs, political instability, the long term growth story of Nepal’s auto Industry remains intact. Another important thing is involvement of private sectors in government agencies like Revenue Advisory Committee, Customs Evaluation Review Committee, Roads Board and National Transport Board is necessary. It is important that government should discuss the issues with the private sector before issuing new rules so that they can be implemented promptly without hassles. However, the initiative of the government to implement Euro 3 standard is praiseworthy. With the implementation of Euro III in Nepal, air pollution can be controlled to some extent. A recent study shows 60 percent of air pollution in the capital is contributed by vehicles. Of a total of 1.2 million vehicles in Nepal, 800,000 are registered in Bagmati zone.

Automobiles sector is the backbone of the national economy. Further, government needs to develop several auto-villages across the country to solve the existing problem of haphazardly stationed garages and auto workshops. It is imperative that the government plays a role in raising Nepal’s auto market through creation of a favorable business environment, attracting investments, promoting R&D and facilitating infrastructure creation. The automobile industry also has the opportunity to proactively establish best in class practices specifically in labor policies and innovative business models for mobility. If government takes initiation and work accordingly this will significantly impact the revenues, costs and profitability of stakeholders. Nepal has higher tax duties in vehicles as compare to other countries. Government has imposed one of the world’s highest import duties 240 per cent on automobiles and increase in excise duty by 10 percent. It is no wonder that Nepal’s auto industry is suffering from a terrible decline in sales. Two other reasons behind deceleration of auto transactions are difficulty in accessing auto loans and high interest rates on available ones.

However; there are various issues still to be taken care of. The government fails to value the contribution of the sector in nation building. It never comes up with improved policies for the development of this sector. The policy makers are not aware of this problem and do not try and alleviate it in order to improve the role of the automobiles industry. Focusing on issues related to the customs duty structure, auto traders that the government need to examine them and come up with a concrete agenda. In fact , harsh taxation policy against the sector has been blockage for the development of this sector. Issues related with taxation have been coming around time and again and government fails to address it every time. The relatively easy availability of auto loans and inflow of remittance had helped the automobile industry to survive. Government should think about road expansion rather than imposing high duties on automobile imports.

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4 thoughts on “Challenges in Nepal’s Automobile Industry

  1. OMG! Import duties of 240 per cent. That’s unbelievable. Really interesting article. Hope all is well in your world!
    Hugs Paula xxxx

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  2. yes Paula it is 240 percent..Poor we 😦

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  3. and what is the import duty for electric automobiles such mahindra e2o and electric 2 wheelers such as terra motors

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  4. I wrote this article in November 2, 2012. I am sorry to say the current market of Nepal as I have been living abroad and I am no longer working for automobile industry. Thanks for you question. 🙂

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