By Anjan Shrestha
The automobile sector in Nepal is fraught with challenges. These challenges are often shaped by shifting government policies. New sets of challenges emerge with every change in government policies.
Laws and policies formulated by the Ministry of Finance, the Ministry of Industry, Commerce and Supplies, and their respective departments have rarely been favorable to the automotive sector.
Poor infrastructure is another challenging issue. While large-scale development has taken place, the quality of roads remains subpar. Since driving in such conditions is risky, many potential buyers deter their plan as they do not want to endanger their lives on unsafe roads.
Nepal’s broader economic environment is also weak. A large number of young people are migrating abroad, and industrial activity has slowed significantly. Most industries are operating at just 20-30% of their capacity. While there has been some progress, the pace of improvement is far from sufficient.
There are, however, some encouraging signs. The automobile market is seeing gradual recovery, driven mostly by electric vehicles, while sales of petrol-powered vehicles continue to lag. Two-wheeler sales are also slowly picking up, offering some encouragement to businesses.
During my time as NADA president, I strongly advocated for bonded warehousing. The government was convinced, but there was no suitable location then. With the Chobhar Dry Port now in operation, it is more feasible than ever.
No business can flourish in the absence of coherent and long-term transport, trade and tax policies. In the past, budget policies would set the course for 10 years. Now, policies shift with every change in government or minister, making it difficult for entrepreneurs to make long-term investment.
Political instability and frequent policy changes have created a situation where the industry faces fresh challenges twice a year. Adding to the difficulty, monetary policy has now become a weapon that further undermines the auto sector. It is unclear what direction the government actually intends to take.
Bank interest rates are also volatile. Although the state has reaped significant revenue from the automobile industry, it has given little back in return. Despite this, several motorcycle assembly plants have been established in recent years, including a Hyundai vehicle assembly facility. Vehicle assembly, which involves fitting together 4,000 to 5,000 components, is often considered the mother of the automobile industry.
Although these assembly units are a significant achievement in Nepali automobile industry, there has been little effort to preserve and support them. This should have been a turning point-an opportunity to develop ancillary industries around assembly. If the government creates an enabling environment, the private sector is ready to invest in related manufacturing.
We have some of the world’s highest customs and excise duties. Customs rates are set with a purely revenue-oriented mindset. Many assume the auto business is simple-import vehicles, place them in showrooms and sell. But the reality is quite different. Huge investments are required, and all taxes must be paid upfront at customs, along with interest costs. To make this business more viable, we need to adopt the concept of bonded warehouses.
At present, vehicles are stored only after customs clearance. Some importers delay clearance by parking vehicles in zones outside the customs area. They pay duties and bring them only when needed. But even that comes with costs, as importers need to pay parking fees in India or China. If bonded warehouses were available within Nepal, these unnecessary expenses could be avoided.
During my time as NADA president, I strongly advocated for bonded warehousing. The government was convinced, but there was no suitable location then. With the Chobhar Dry Port now in operation, it is more feasible than ever. Unfortunately, my successors at NADA did not pursue it further.
Unity among auto dealers has weakened recently. One group approaches the government with one set of demands, while another proposes something entirely different. During budget discussions, the finance ministry takes advantage of this division, exploiting it to push through measures that harm the industry.
(Excerpt of remarks by Anjan Shrestha, former President of NADA and Senior Vice President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), delivered at the ‘Automotive Conclave 2025’ organized by MeroAuto.)
