KATHMANDU: Nepal’s electric vehicle (EV) market has witnessed massive changes in customs and excise duties between 2014 and 2025, reflecting the government’s evolving strategy to promote sustainable transportation.
In the fiscal year 2014/2015, customs duties on EVs were set at 0%, and excise duties were kept low at 10%. This policy encouraged adoption by making EVs an affordable alternative to traditional internal combustion engine (ICE) vehicles. This policy also laid the foundation for the growth of the EV market in Nepal.
Between 2016 and 2020, customs duties increased slightly to 1%, while excise duties remained unchanged at 10%. The market remained largely stable and affordable during the period. However, a major policy shift occurred in the fiscal year 2020/2021 when customs duties on EVs surged to 40%-80% and excise duties jumped to 30%-80%, depending on the motor capacity. This sudden and sharp tax hike led to a significant decline in EV imports. It also slowed down the momentum seen in EV adoption.
Recognizing the negative impact of duty revision on the growing EV market, the government revised its policy in 2021/2022, reducing customs duties to 10%-40% and waiving excise duties altogether. This move helped revitalize the market, making EVs more accessible to consumers.
The government introduced a tiered tax structure based on motor capacity in 2022/2023 and 2023/2024, with customs duties ranging from 10% to 60% and excise duties ranging from 0% to 60%. Smaller EVs faced lower taxes, while powerful, luxury EVs faced higher rates. This reflected the government’s intention to prioritize affordable, smaller vehicles over luxury models.
So much so, many EV dealers have postponed the launch of several new models, while some are stacking up existing models to shield customers from possible tax hikes.
In the current fiscal year 2024/2025, customs duties have been kept in the range of 15% to 80%, and excise duties at 5% to 50%. For EVs with motor capacities between 0-50 kW, customs and excise duties remain low at 15% and 5%, respectively. However, EVs with higher motor capacities, such as those over 300 kW, are subjected to maximum rates of 80% customs duty and 50% excise duty.
Last year, the government increased EV taxes by 5%-20% across various motor power categories. The change of duty hike was not felt much in the market as dealers absorbed the added costs. However, rumors about a possible hike in customs or excise duties in the upcoming fiscal year budget have left automobile dealers and potential buyers in a state of uncertainty. So much so, many EV dealers have postponed the launch of several new models, while some are stacking up existing models to shield customers from possible tax hikes.
Customs yards in Rasuwa and Tatopani along the Nepal-China border are filled with electric vehicles, and roads leading into Kathmandu are seeing a noticeable increase in newly imported EVs. For example, MG’s EV warehouse in Anamnagar is filled with freshly arrived units, and similar trends can be observed among other major EV brands.
The recent revision to the central bank’s automobile financing norms is the latest example of unstable government policies regarding EVs. Since banks are now allowed to invest only up to 60% of the cost of EVs, down from 80% in the past, it has become more challenging for distributors to sell new vehicles. If the customs or excise duties are revised through the budget, it would land another blow to the dealers.
For now, all eyes are on the budget announcement.
