Auto industry: On path to better times

KATHMANDU, SEP 04 -

Nepal’s automobile sector has been on a roller coaster for the last six years. In fiscal 2008-09, vehicle registrations crossed the six-figure mark for the first time. The next fiscal year was another landmark year as registrations almost doubled. Then came a slump that dragged on for two years. The good times returned in fiscal 2012-13 when registrations reached an all-time high of 208,483, only to dip in the last fiscal year.

With the domestic auto sector having completed one full cycle, automobile dealers say the sector is now heading towards stability. According to them, a small decline in sales in one particular year doesn’t make much of a difference as there has been growth in various sub-sectors that provides opportunities to grow.  

With sales in the markets outside the Kathmandu valley growing rapidly and major infrastructure projects coming up in the near future, future growth prospects look rosy, said automobile dealers.

The slow and steady growth the automobile sector has been witnessing of late has been led mainly by the easy financing facility being provided by banks and financial institutions (BFIs). Interest rates on auto loans have come down to 8-8.5 percent from 16 percent four years ago. With urban middle class increasingly looking to upgrade to four-wheelers, there has been consistent growth in car and jeep sales. According to the figures issued by the Department of Transportation Management (DoTM), a total of 198,343 vehicles were registered in the fiscal year 2013-14 against 208,483 in the previous year. The decline of 5 percent, according to automobile dealers, was due to the two-wheeler segment whose sales plunged in the last fiscal year.  

Despite the automobile sector being one of the largest revenue contributors for the government, automobile dealers say the government has not been able to come up with policies to support the auto sector’s growth.

“The market has become stable compared to the past few years,” said Saurabh Jyoti, immediate past president of the Nepal Automobile Dealers’ Association (NADA). “However, there are a lot more things that can be done, especially on the part of the government.”

Making cars affordable

According to Jyoti, the high import duty on vehicles has made automobiles expensive in Nepal. “Though this year’s budget did not increase the customs duty, there has been an increment in the road tax. This has increased the burden of the general people,” said Jyoti, adding that the increment in road tax has increased the cost of four-wheelers by Rs 30,000 to Rs 40,000 apiece and of two-wheelers by Rs 4,000 to Rs 5,000 apiece.

NADA General Secretary Gopi Neupane said that the penetration of vehicles in Nepal is still low compared to other countries. “Only around 4 percent of the total population rides motorcycles while less than 1 percent owns a car,” said Neupane. “In a country like ours where the mass transportation system is inefficient, the government should realize that private vehicles are the means of mobility.”

Automobile dealers say that while there is an urgent need to promote and strengthen the mass transport system for the larger population, the government should also think about making vehicles affordable. “By reducing the customs duty, the government can make vehicles affordable for a larger section of the population while it can also increase revenue collection from this sector,” said Anjan Shrestha, executive director of Laxmi Intercontinental.

Promote green vehicles

One of the major shortcomings on the part of the government is its indifference to promoting green vehicles, that is, hybrid and electric vehicles. The government doesn’t have a policy on electric and hybrid vehicles even though ministry officials say they’re working on it. The current fiscal year’s budget has slashed 25 percent off the import duty on hybrid vehicles. However, nothing such has  been mentioned about electric vehicles. Automobile dealers say the government’s efforts are not sufficient and that it needs to make a long-term plan to promote green vehicles especially when Nepal is an importer of gasoline.

Green vehicles, if promoted, have multiple benefits. On the one hand, it is environment friendly, while on the other hand, it can significantly reduce Nepal’s dependency on imported petroleum products. Nepal imported petroleum products worth Rs 131.33 billion in the last fiscal year, and demand is growing at the rate of 20 percent annually.

Cashing in on festive mood

With the NADA Auto Show, the one and only auto show in the country, starting from Wednesday, the automobile sector is a beehive of activity. From new product and model launches to festive schemes and discount offers, many things have been planned for the fair. The two-month window lasting from September to October is the main business period when 30 percent of the annual auto sales take place.

Source: The Kathmandu Post