Financial Impact on Nepal's Automobile Sector: A Look at FY 2077/78 and 078/79
The financial years (FY) 2077/78 and 078/79 were very fruitful for the automobile sector. In the year 077/78, including vehicles and their parts, the import was worth Rs. 1.2369 Kharba, which marked an increase of 47 percent compared to the previous year.
In 078/79, imports did not see a significant increase, but sales remained at a consistent level. During that year, the import of vehicles and parts experienced a slight uptick, reaching 1.2391 Arba.
However, a significant recession appears to have hit the vehicle sector thereafter. According to a study conducted by the Confederation of Nepalese Industry, the demand for the automobile sector plummeted by 80 percent in the first quarter of the last financial year. The import data for the last financial year 079/80 also corroborates this decline, with the import of vehicles and parts decreasing by 50 percent compared to the previous year, amounting to 61.80 Arba.
Just a year prior, a private study conducted by the NADA Automobiles Association revealed that Nepal's automobile sector provided direct employment to 100,000 people, with an additional one million benefiting indirectly from this industry and related businesses. However, this situation no longer holds true.
High interest rates, stringent import regulations, and soaring fuel prices have led to a severe downturn in the automobile sector, resulting in numerous job losses and the closure of many car showrooms.
The crisis in the auto sector can be likened to the situation in the cement industry in Rupandehi. Until two years ago, 1,400 tipper trucks used to transport goods for the cement industry daily. Today, that number has dwindled to a mere 200 trucks. The sluggish demand for automobiles directly affects the sale of tires, mobiles, and car parts.
The automobile sector, which had rebounded after the onset of the Covid-19 pandemic in Chaitra 2076, reached new heights in the subsequent fiscal year 2077. However, it also marked the beginning of state-controlled policies impacting this business.
