Khatiwada himself justified the tax increase in his budget speech saying electric SUVs were for the wealthy, and they should be taxed like any other SUV. Having Prime Minister Oli’s ear meant that Khatiwada could convince him that there should be no rebate on electric vehicles. Under pressure to show his green credentials, Oli last week announced the fig-leaf tax reduction.
“We are in no position to promote electric vehicles anymore,” an importer of high-end battery-powered SUVs told Nepali Times on condition of anonymity. “If there is no cost differential with a similar capacity petrol SUV, Nepali customers will not buy electric. There has to be an incentive.”
After the budget announcement, there are 450 vehicles still stuck at customs and the International Container Port in Birganj. Importers had been waiting for a government decision to revise the tax, but now have no option but to clear the vehicles.
The extra cost will be passed down to customers who had booked the vehicles, and some of them will be paying up to 50% more than they would otherwise have. Some buyers have cancelled their orders.
Before the budget in May, electric cars only had to pay 10% excise and 13%VAT, minimal customs duty, and the Rs30,000 annual road tax was waived. This had led to a dramatic spurt in electric car sales in Nepal because electric cars were more competitive than fossil-fuel cars which are taxed at 260%.
Further improvements in range to 480km, and the reduction of fast charge times of plug-ins to 30 minutes made them popular for cross-country drives. Kia and Hyundai, for instance, could not keep up with a surge of demand from Nepali buyers.
However, the budget in May raised the total tax for electric vehicles to between 120-140%, which priced battery cars higher than a petrol or diesel car of the same size. Electric vehicles of peak power 50-100kW had to pay 40% excise, 50% if it was 100-150kW. The excise went up to 60% for battery cars with peak power of 150-200kW.
But although last week’s Cabinet decision reduced the tax on smaller capacity e-vehicles by 80% of the increased amount, and by 75% for cars in the 40% excise bracket, there were only minimal reductions for cars with higher kW.
Most electric vehicle importers said they would not be importing any more units after clearing their present stock. Customers will not buy electric cars which cost the same as petrol cars even though they save money on fuel because of the perceived lower resale value.
Nepal had a chance to be ahead of its neighbours, but will now be going electric only because India and China are shifting to electric vehicles. By 2030, India’s goal is for 30% of vehicles manufactured in the country to be electric. China’s target is to ensure that 25% of all vehicles in the country will be plug-ins by 2025.
Says Shrestha of Agni Group: “Electric vehicle sales were picking up, we thought there was a bright future. But Nepal has gone back five years.”