Reducing import and special consumption tax on electric vehicles
Once suffocated by dust and car horns, the capital Kathmandu is witnessing a spectacular change: 76% of cars and 50% of light commercial vehicles sold in Nepal in the past year are electric vehicles. Meanwhile, this figure is almost zero for the previous five years. The market share of electric vehicles in Nepal is currently only behind a few countries such as Norway, Singapore and Ethiopia. Meanwhile, the global average in 2024 will only reach about 20%.
This is the result of a series of strong policies to take advantage of available clean hydropower sources, reduce dependence on fossil fuels and improve air quality. Nepal's model also lights up hope for many other developing countries, which are looking to strengthen their economies without having to go through a period of heavy pollution like the rich countries have gone through.
According to Mr. Mahesh Bhattarai - General Director of the General Department of Neural Customs, the key to success is creating cost advantages for electric vehicles. For us, electric vehicles are a comparative advantage. This is a good thing for us, said Mr. Mahesh Bhattarai.
Many countries are making efforts to electrify their fleets, but for Nepal, switching to electric vehicles is quite natural. The reason is that this country possesses abundant clean energy from rivers flowing down from the Himalaya.
In 2015, border tensions between Nepal and India seriously disrupted oil imports, which were the country's largest energy source at the time. The Nepalese government has since stepped up investment in hydropower and grid infrastructure, helping to create clean and cheap electricity. Almost all households currently have electricity and the alternating power outage has ended.
To maximize the potential of domestic power sources, Nepal needs to switch to using electricity in the transportation sector. However, the price of electric vehicles at that time in Nepal was still high compared to the average income per capita of only about 1,400 USD. Therefore, the Government has mobilized all possible support measures.
In 2021, the government reduced the import and special consumption tax on electric vehicles to a maximum of 40%, while gasoline vehicles were subject to a tax of up to 180%. Thanks to this policy, an electric SUV costs about 38,000 USD, even cheaper than the equivalent gasoline version.
Creating a feasible business model for hotels and restaurants
Regarding charging infrastructure, the Nepal Electricity Authority has built 62 charging stations, distributed in Kathmandu and along national highways. The government allows anyone to build a charging station, exempts almost all equipment import taxes, and supports free transformer, the most expensive component in the system.
According to statistics from this agency, businesses have installed about 1,200 charging stations, while households may have equipped thousands of more charging stations.
Finally, the electricity price for charging stations is set at a lower level than the market price. With this price list, filling a traditional car with gas costs 15 times more than charging an electric car. That difference has created a viable business model for hotels, restaurants and roadside establishments participating in installing private charging stations.
At first, everyone was worried, not knowing how to implement it, whether it could be operated, said Mr. Kul Man Ghising, the operator of the Nepal Electricity Agency until March. But we keep trying, then try again and keep trying.
Local authorities also took action. The city of Lalitpur, near Kathmandu, has converted all police motorbikes to electric driving. Meanwhile, Sajha Yatayat Transport Company is operating 41 electric buses and is about to receive 100 more. The long-term goal is to need about 800 vehicles to build a network large enough to replace personal vehicles.
Clearly, Nepal is showing a green transformation model suitable for developing countries: Taking advantage of internal advantages, supporting consumers to access electric vehicles and gradually improving infrastructure.
