Suitability of EVs in Nepal – Policy, Economics, Topography and Demography

Explore

Nepal is an import dependent landlocked country with no access to sea routes. Road transport dominates the major transport infrastructure in Nepal, followed by airways, and plays a crucial role in passenger and cargo movement within the country. Along with Nepal’s economic growth, social transformations and rapid urbanization, vehicle ownership and usage has been increasing as well.

This article by Sahayu Goyal evaluates the suitability of electric vehicles in Nepal from a policy, economic, topographic and demographic perspective.

A. POLICY

The Paris Agreement (2015) established the Nationally Determined Contribution (NDC) as the primary policy mechanism through which global action for climate change is expected to take place and Nepal’s NDC includes ambitious targets for low-carbon sustainable transport. NDC outlines a series of 14 targets. Of these, four targets are focused on the transport sector:

To support the above action plans, the government has introduced a number of supporting policies to enable faster adoption of EVs in the country:

• Given there is no local assembly/manufacturing of the vehicles, Nepal is entirely dependent on import of CBUs (Completely Built Units) from foreign countries.

The import duty levied on passenger ICE Vehicles and passenger EVs is approximately 240% and 120% respectively. Import duty on commercial ICE and commercial EVs is approximately 70-100% and 1% respectively.

The Import duty on Passenger EVs was 29% till May 2020. This lead to a significant increase in EV sales in 2018 and 2019 of models such as Hyundai Kona, Mahindra e20, Kia Niro and MG ZS EV.

• Nominal Road Tax on EVs, commercial and passenger.

• Subsidized electricity tariff rates for charging stations.

• Favorable bank financing for EVs including 80% loan provision (compared to 50% for ICE) and reduced interest rates.

B. ECONOMIC

Trade Deficit: As Nepal is a landlocked country, it is entirely dependent on its neighboring countries to meet local demand for fossil fuel. As such the trade deficit is growing year on year as fossil fuel imports contributed to almost NPR 200 billion (USD 1.7 billion) in the last fiscal year. A transition to EVs can reduce Nepal’s dependence on import and reduce the yawning trade deficit.

Hydropower Surplus: The other side of the energy landscape in Nepal presents a more optimistic view as the country has over 83,000 MW of hydropower potential. There are a number of projects in the pipeline currently and Nepal is expected to meet and exceed its energy demand from hydropower by 2022. This makes electric vehicles well positioned to assume a much greater role within our transport systems.

Total Cost of Ownership: One of the biggest hurdles encountered globally for EV adoption is the difference in upfront acquisition cost between EVs and ICEs. Given the import duty structure (as mentioned above), EV acquisition cost has achieved parity with its ICE counterparts in Nepal.

C. TOPOGRAHY

A challenge encountered by EVs has been the steep gradients of roads in Nepal, especially in the mountainous regions. However, it is important to note that most EVs now come with a gradeability of >25% and the mountainous regions account for only a small fraction of vehicle sales in Nepal. Other factors that favor EVs are as follows:

Short intra-city distances: Kathmandu, the capital city of Nepal, accounts for almost 55-60% of vehicle sales in the country. A passenger vehicle, on average, travels less than 30 kms a day suggesting that EVs with high range are not required.

Short inter-city distances: Owing to the topographical conditions of the country, inter-city distances are short and travel time is long. Most major cities are within 250 kms of Kathmandu but take in excess of 5hrs to cover because of poor road infrastructure. Strategically located charging stations can help alleviate range anxiety concerns.

Ambient temperature: Barring mountainous regions, most of Nepal enjoys a tropical climate, with a range of 5 – 35 degrees C observed in Kathmandu Valley. The ambient weather conditions ensure that the battery is not faced with the harsh conditions of the winter and motor heating issues are not encountered in the summer.

D. DEMOGRAPHY

As per studies conducted, the level of awareness regarding EVs amongst Nepali consumer base is extremely high. This is as a result of combination of factors including a young population (median age 23 years), high level of mobile penetration (1.3x the population), high adoption rates of new technology, large expat population and environment awareness programs and initiatives.

Furthermore, the current political landscape has created a sentiment to reduce import dependence and become self-dependent. While the above-mentioned factors all contribute positively to widespread adoption of EVs in Nepal, the country is still early in the maturity curve to embrace the technology fully. As with other countries, a robust policy framework, development of charging infrastructure, incentive programs and consumer awareness can help propel the EV transition in Nepal. The current framework provides a foundation to further build the ecosystem required to make Nepal a model country for EVs around the world.

About the Author

Sahayu has a Masters from University of Cambridge and is currently working on building the ecosystem for electric mobility in Nepal. Areas of focus include developing financing mechanisms for EVs and charging stations for wide scale adoption of the technology locally.