Encouraging Electric Vehicle Use In Nepal

The Environment-friendly Vehicle and Transport Policy 2014 of Nepal aims to provide a subsidy scheme for the promotion of electric and non-motorized vehicles.

Dec. 4, 2022, 11:40 a.m.

It was around year 2006, a meeting was organized by revenue division of the Ministry of Finance whether to recommend the government to provide import duty and taxes concessions to three-wheeler assembling plants. Representatives of Electric Vehicle (EV) Manufacturing Association and ministry officials were present in the meeting. I also attended the meeting as a ministry official.

The EVs industry association was demanding tax exemptions since couple of years, however by that time, electric vehicles were not in considerable numbers in Nepal and its importance was also not well known. Besides the government had a policy to discourage tax exemptions, which affects revenue collection and the process to provide tax concessions for import and assemble of EVs was pending since long time. However, after long discussions, the meeting recommended for only partial tax exemptions, which the government, later approved in its annual budget.

Now, as the popularity and benefits of electric vehicles are well known, its production, sales and uses are increasing in significant numbers worldwide. Nepal has also embarked upon a plan to encourage use of EVs substituting fossil-fuel vehicles.

The Environment-friendly Vehicle and Transport Policy 2014 of Nepal aims to provide a subsidy scheme for the promotion of electric and non-motorized vehicles.

According to the plan, the government would encourage to convert fossil fuel-run vehicles into electric ones, and it would also provide subsidy for industries that are associated in production, research and development of electric vehicles, and develop the use of alternative energy in transportation system.

The plan has proposed encourage to set up electric charging stations, battery-recycling center, manufacturing plants for electric vehicles’ parts and products, and develop infrastructure for bicycles, motorcycles, cars, taxis, micro and minibuses, trams, trolley and electric rails. However, the plan to increase the share of EVs to 20% as of 2020 (as per the Paris Agreement 2015) failed to meet the target.

Realizing the importance of EVs, this year, the government has slashed the excise and customs duties on raw materials and parts for manufacturing of ordinary four-wheelers by 50 percent and 25 percent, respectively.

It has also decided to levy, customs duty of only 1 percent on parts and raw materials used in manufacturing electric three-wheelers and two-wheelers in a bid to promote domestic production of electric vehicles.

These decisions have shown positive impact on as some companies have already shown interest establishing electric vehicle manufacturing plants in Nepal and the existing EV manufacturing companies have also been delighted with the decision.

As many as 20 electric vehicle assembly plants have been registered with Nepal's Department of Industry since 2015, as it seeks to promote electric vehicles to cut the import of petroleum products.

Recently, some multinational EV companies have also finalized to establish manufacturing plants in Nepal. Sundar Yatayat has joined hands with China's Sichuan Guohong Automobile Co. Ltd to produce electric vehicles in Nepal and has established a joint venture, Sundar Auto Engineering.

On June 6, a meeting of the Investment Board of Nepal decided to begin fresh negotiations with South Korean automaker Motrex Co Ltd to establish a manufacturing and assembly plant for electric vehicles in Nepal. Motrex intends to assemble Hyundai and Kia passenger vehicles in Nepal.

If we go through development of electric vehicle in Nepal, in 1964, a electric Ropeway Cable Car was built in Nepal through the route (Hetauda-Dhorsing-Chisapani-Chandragiri-Kathmandu) to transport goods and construction materials. After development of road transport this ropeway became completely nonfunctional.

Thereafter in 1995, Nepal started use of electric vehicle, with 22 trolly buses supported by China. However, its operation completely shut down in 2009 due to government’s inability to continue it.

In 1993 Nepal introduced concept of SAFA Tempo, three wheelers with 700 tempos and 30 charging stations, which later reach reached 45000 in 2018 numbers with around 10% proportion total vehicle sold in Nepal.

The first cable car was developed at Gorkha district connecting Manakamana and Kurintar in 1998.

In 2010 first electric car brought in Nepal. In 2019-20, Nepal imported 575 units of electric cars, which dropped to 249 units in 2020-21 due to Covid-19 restrictions and higher taxes. However, in the last fiscal year that ended July 16, its imports jumped sevenfold to 1,807 units.

However, still Nepal needs to go long way to increase use of EVs in massive scale. First, the government should direct public institutions to use a maximum number of electric vehicles, buying EVs in considerable numbers. Besides, it must implement quota system in the import and registration of new vehicles that are run by fossil fuels to increase the use of EVs specially in Kathmandu valley.

EVs have great potential as a way for cities to reduce local air pollution, greenhouse gas emissions and transport sector fossil fuel use. Coupled with renewable energy, EVs can produce zero emissions at the vehicle exhaust system and much lower life-cycle emissions.

The Kathmandu valley has been one of the most polluted cities in the world and currently this city is bearing excess burden of vehicles as well. The road congestion problems may not be better even after substitutions of conventional vehicles by the EVs in future if transport and road congestion problem are not properly addressed here in time.

Many major cities of the world - Bergen, Oslo, Liuzhou and Shanghai are already on their way to becoming electric vehicle (EV) cities, while an electric-rickshaw revolution is underway in Indian cities.

Electric vehicle sales may increase from 2% of global share in 2016 to 30% by 2030. EVs include, but are not limited to, road and rail vehicles, surface and underwater vessels, electric aircraft and electric spacecraft.

With the increase in number of electric vehicles, it is also necessary to create an appropriate number of charging stations in maximum locations. Nepal government has plans to install around 50 charging stations in the major cities of Nepal by in the coming year, which may not be enough to charge the EVs.

Rapid increase in numbers of electric vehicles on the road would be a key step toward reducing greenhouse gas emissions from vehicles. It would certainly reduce fuel costs dramatically because of the high efficiency of electric-drive components and it would have significant emissions benefits over conventional vehicles.

The government must offer special discount on supply of electricity as a ‘service’ for the charging of electric vehicles and it should exempt registration fees and offer discount on annual vehicle taxes for battery-operated/electric vehicles.

Moreover, as public transportation causes a significant environmental damage, therefore they should be given certain years to convert petroleum-based vehicles into electric vehicles with proper facilities in priority basis thereafter other vehicles should be converted on similar parameters. Moreover, under long term plan to stop import of vehicles run by fossil-fuel, the government should announce a cut off year, on phase wise basis for different districts as some countries have already announced the year for restriction after 2035.

( Shrestha is a former Under Secretary at the Ministry of Finance, Nepal and a UNDP Expert in Africa)

Hari New Photo.jpg

Hari Prasad Shrestha

He worked under Ministry of Finance, Nepal as Under Secretary and has been associated with the United Nations Development Program (UNDP) Sierra Leone and South Sudan and UNMISS.

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