KATHMANDU, SEPTEMBER 11

The automobile industry - which faced a crisis three years ago due to the COVID-19 pandemic, followed by import restrictions, and strict policies of the Nepal Rastra Bank (NRB) - is now cautiously looking forward to this festive season.

Domestic auto dealers are both anxious and excited with the approaching festive season, as more than 40 per cent of the total automobile sales for the year take place during this time.

Moreover, the NADA Auto Show 2023 is giving the morale of the auto dealers a boost.

NADA President Dhruba Thapa emphasised that despite the ongoing economic slowdown, the NADA auto show this year has witnessed significant participation from various automotive segments, highlighting the need for appropriate commercial activities to stimulate the country's economy.

He added, 'Due to the current economic downturn and NRB's strict policies, the automobile industry has been severely impacted. Amidst this economic chaos, NADA is being organised to inject vibrancy into the economy.'

According to Thapa, amid the crisis and recession, the auto industry is expecting to witness a boost through bookings and inquiries from customers at the NADA show.

Thapa also mentioned that the NADA show offers various special discounts on vehicle purchases, and customers have always seized this opportunity. He said, 'The manufacturing companies themselves are directly involved in selling automobiles, offering special discounts and deals targeting the festive season. Moreover, new models of automobiles are also launching in the upcoming show. Multiple banks are also participating in the show to invest in the auto sector.'

NADA Auto Show 2023 is scheduled for September 12 to 17 at Bhrikuti Mandap Exhibition Venue. This edition of the exhibition will showcase 16 brands of four-wheelers, 22 brands of two-wheelers and seven brands of light commercial vehicles. In addition, the event will witness the exhibition of 30 auto-related companies including lubricants, tyres, batteries, garage equipment and other auto components along with nine financial institutions.

Altogether 82 exhibitors comprising importers, dealers, distributors and manufacturers will be accommodated in around 120 small and big stalls.

However, Thapa remains doubtful that the automobile industry could fully recover from the crisis due to certain strict policies of the government.

Citing that festive season sales account for around 40 per cent of the total automobile sales of the year, he urged the government to be more flexible to prevent the industry from suffering significant losses during this festive season.

'The automobile industry contributes 21 per cent to the country's total revenue, which is Rs 100 billion. Hence, the government should consider amending its policies to provide more flexibility,' Thapa opined.

Sunil Rijal, vice-president of NADA Automobiles Association of Nepal, expressed concerns about the challenging conditions faced by the automobile industry despite the lifting of import restrictions.

He cited several government policies, such as the high risk weightage for auto loans and non-electric vehicle loan schemes by banks, which were discouraging customers from purchasing new cars during the festive season.

According to Rijal, customers were finding it difficult to secure full financing for their auto purchases. The reduction of the risk weightage to 100 per cent on auto loans up to Rs 2.5 million by the Nepal Rastra Bank was deemed insufficient to address the current crisis. Rijal pointed out that this threshold might not be applicable to mid- and higher-range automobiles, which constitute a significant portion of auto sales.

Additionally, the financing margin for non-electric vehicles was unsatisfactory, with banks only covering 50 per cent of the cost. In contrast, banks offered up to 80 per cent loan facilities for electric vehicles, leading to increased sales of electric cars.

Rijal highlighted that despite being a high revenue-generating sector, there was a lack of alignment between the government, the Nepal Rastra Bank and businesses, resulting in low revenue generation.

He also mentioned that banks were refusing to disburse loans despite having sufficient liquidity, and dealers were unable to import vehicles.

Those who had already imported vehicles were stuck at various customs points due to low demand.

Despite these challenges, Rijal expressed hope that the existing problems would be resolved soon.

Rajan Babu Shrestha, the chief executive officer of Sipradi, added that more than 3,500 commercial vehicles were stranded at custom points due to low demand.

He attributed this situation to the government's failure to disburse payments to contractors and low investment in infrastructure, which had halted the delivery of commercial vehicles.

Shrestha noted that typically auto sales peak during the three months from September to November. However, due to various factors, the industry had incurred around 40 per cent loss during festive season for the past three years. He emphasised that the industry was now in a 'wait and watch' mode, hoping for a turnaround.

A version of this article appears in the print on September 12, 2023, of The Himalayan Times.