Nepal's past tax rebates and China's technological innovation in affordable EVs have contributed to the popularity of battery-powered vehicles in Nepal, but the new budget introduced by the government could slow the transition to renewable-energy transportation.

Nepal market

Despite its relatively small market size, Nepal remains a market for BYD. The company's marketing activities and Nepal's favourable EV tax regime, until recently, have contributed to the growing presence of BYD and other Chinese and Indian EVs on the country's roads and highways.

"Nepal is an important market to us," BYD Asia-Pacific General Manager Liu Xuelian said during a recent round-table discussion at BYD's headquarters in Zhengzhou. "We saw significant potential for EV development and for our vehicles in Nepal as far back as 2010."

The combined effect of the latest policy changes could result in slower growth in Nepal's EV market without causing a complete collapse. Two key questions remain in the coming months: whether consumers will continue to purchase EVs at the revised prices, and whether the additional revenue generated through the new taxes will contribute to the long-term development of the EV ecosystem. The developments made by companies such as BYD coincide with a period of change in Nepal's automotive sector. Finance Minister Swarnim Wagle's new budget, announced last week, marks a shift from the country's previous EV policies, which helped Nepal rank second only to Norway last year in the proportion of newly registered vehicles that were electric.

Putting tax on electrons

The new tax on imported EVs will now be based on the import value of the vehicle rather than motor capacity (kW), as was previously the case. This means taxes will be calculated using a vehicle's CIF (Cost, Insurance and Freight) value and may reflect the government's view that the EV market is maturing and represents a potential source of revenue.

Previous excise duties have been replaced by a new Clean Infrastructure Investment Fee, which the government says will help fund EV-related infrastructure. The previous kW-based structure allowed expensive EVs with lower-rated motors to benefit from lower taxes. By linking taxes to vehicle value, the government has introduced a value-based taxation mechanism for EVs, bringing them more closely into line with the way internal-combustion-engine vehicles are taxed.

The budget also encourages the installation of EV chargers at petrol stations as part of the minimum infrastructure requirement, a measure that could reduce range anxiety if implemented. However, affordability remains an immediate concern. Although a flat 20% customs duty has been introduced, higher-value EVs will now face higher infrastructure fees. While the NPR 3 million to NPR 5 million (US$ 19,620-32,700) segment, which has driven much of Nepal's recent EV adoption, may experience relatively modest changes, premium and luxury EVs will face significantly higher import costs.

Changes in foreign-exchange rates between the Nepalese rupee and other currencies mean that CIF values at the time of import may fluctuate, potentially causing vehicles to move between the new tax brackets.

The government also plans to introduce a 5% VAT on households that consume more than 50 units of electricity per month (see page 1 and Editorial, page 2). This will further reduce the running-cost advantage EVs have enjoyed over petrol and diesel vehicles.

Nepal's EV industry is therefore moving towards a higher-cost and more regulated operating environment, with additional infrastructure measures planned. This could create both benefits and challenges for prospective vehicle buyers.