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Nepal government sounds death knell on electric vehicles

Hyundai Kona will now cost around Rs 1 crore with the new taxes in place.

The Nepal government sounded the death knell on electric vehicles after announcing a steep hike in excise and customs duties on electric vehicles during the new budget presented to Parliament on Thursday.

This move is a complete contradiction to Prime Minister’s KP Oli’s declaration that 20 percent of vehicles in Nepal would be electric by 2020. It might be a sign of growing tensions within the government that is currently overwhelmed by the coronavirus pandemic. The disconnect and lack of coordination within the government is nothing new here in Nepal. People have taken to social media to vent but if history has taught us anything, nothing will happen. There are many rumours floating around but you don’t have to go far in search of the truth. The main reason for this absurd hike? Money.

The government has made it clear that it wants to achieve 7 percent growth for the coming fiscal year. But with their much-touted ‘Visit Nepal 2020’ campaign failing spectacularly coupled with a global recession, the government is under pressure to raise money to meet their overly ambitious target.

Revenue collection, remittances and tourism income have dried up due to the extended lockdown and as usual, the first thing on the chopping block is the auto sector. Nepal already has one of the highest import taxes on vehicles at 288 percent and the cost of owning a vehicle continues to rise year after year.

KIA Niro will now cost around Rs 1 crore with the new taxes in place.

Despite paying an insane amount of taxes, our road and transport network continues to be pathetic.

The one bright spot was electric vehicles. In 2016, the government had cut custom duty on private electric vehicles to 10 percent and charged no excise duty to encourage major car manufacturers to launch battery-powered vehicles in Nepal. Another reason for the low taxes on electric vehicles was to boost the adoption of EVs in the country and ultimately reduce the ballooning fuel imports. Even Khatiwada himself was inaugurating electric buses for Sajha Yatayat just two years ago. What happened since then?   

Sales of EVs in the country were growing at a rapid pace with companies launching new models like the KIA Niro, Hyundai Kona and Ioniq. Customers were moving towards EVs due to improved range and competitive prices along with low maintenance costs. Electricity is also widely available throughout the day with little to no outages.

But that all changed in an instant when Finance Minister Yubaraj Khatiwada hiked the excise tax up to 60 percent. To add insult to injury, EVs will now be charged an additional 60 percent customs duty.

What does this mean for EVs in the country?

In one word, death.

One of the cheapest and newest entrants in the EV space is TheeGo with their affordable e8 priced at Rs 1,895,000. But with the latest bombshell from the government, it may cost nearly Rs 3,000,000 just to get an electric vehicle in Nepal.

Other popular EVs such as Hyundai’s Kona and KIA’s Niro may now cost around Rs 1 crore. At that price point, EVs simply cannot compete with fossil powered vehicles.

Sources at major vehicle importers revealed that they were caught off guard by the government’s decision to raise taxes on EVs and that they would be rethinking plans of bringing new EVs into the country.

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