Nepal’s auto sector hits slowdown ahead of holiday season
Nepal’s auto market has seen another slowdown after the government increased excise taxes and road construction costs on two-wheelers as part of the revised budget for fiscal year 2021-2022. The prices will go from Rs15,000 to Rs50,000 depending on the engine displacement.
This latest increase in excise duties and road construction costs will impact those planning to purchase a two-wheeler during the upcoming Dashain and Tihar holiday season. Car dealers usually offer great discounts and programs during this time and price-conscious Nepalese buyers take advantage of these offers to purchase a new vehicle. According to car dealers, sales of two-wheelers increased by 60-65% during this period,
In accordance with the revised budget, the government has increased the excise duty on 125cc to 200cc two-wheelers by up to 50 percent. Before that, the government imposed an excise tax of 40% on 155cc two-wheelers and 40% on 155cc to 250cc two-wheelers. The 125cc to 250cc two-wheeler segment constitutes the majority of sales in the country.
Likewise, the excise duty on motorcycles with a cylinder capacity of 500 to 800 cc has been increased to 100 per cent, an increase of 20 per cent over the previous provision.
The government has also increased the cost of road construction on two-wheelers. Under the new arrangement, the road construction charge on bikes crossing 125cc is Rs15,000 per unit. Likewise, the road construction fee on 125cc to 250cc bikes is Rs 18,000 while 250cc to 400cc bikes will be charged Rs 50,000 per unit and bikes over 400cc will be charged Rs 100,000.
Before the trek, the road construction charge for bikes crossing 155cc was Rs15,000 per unit, 155cc to 250cc were Rs18,000, motorcycles crossing 250cc to 400cc Rs50,000 and bikes crossing a displacement of 400cc Rs100,000 per unit .
Krishna Prasad Dulal, chairman of the Nepal Automobile Dealers Association (NADA) said that although the government has increased the tax on two-wheelers, it has provided for a 50 percent exemption on parts used by the two-wheeler assembly industry, an increase over the old 25 percent.
Dulal said: “The higher waiver will allow domestic assemblers to lower their prices and become more competitive with imported bicycles.”
Dulal said the government move is welcome and also encourages other dealers to open assembly units around the country, which will help establish an industry and create jobs.
According to dealers, the prices of locally assembled bicycles will not increase while the prices of imported bicycles will increase.
Currently, Golchha Group and Jagadamba Group respectively assemble Bajaj and TVS motorcycles in Nepal.
Syakar Group (Honda) and Morang Auto Works (Yamaha) are also planning to open factories to locally assemble two-wheelers.
“We cannot comment on the tax increases that the government is imposing on imported products,” he said.
Dulal said the tax has not been increased on two-wheelers which are mainly used by the general public. He also added that an increase in the tax on two-wheelers would not impact sales.
According to the Customs Department, the country imported two-wheelers worth 33.19 billion rupees in fiscal year 2020-21, a sharp increase of 76.91% as the import bill s ‘amounted to Rs 18.76 billion in fiscal year 2019-2020.
The country imported 208,793 motorcycles in fiscal year 2019-2020, while the number increased to 355,959 in fiscal year 2020-21.
According to vehicle registration data from the Department of Transportation Management, the department registered 198,062 motorcycles through mid-March of the 2019-2020 fiscal year, while the registration was 282,997 during 2018-2019 fiscal year.
According to car dealers, despite a slowdown in economic activity, sales of two-wheelers saw significant growth compared to four-wheelers after the lockdown was lifted last year as people switched to private transport for fear of contract Covid-19 using public vehicles.