The Nation Where 76% of Cars Sold Are Electric

The Rise of Electric Vehicles in Nepal

Nepal, a country nestled between India and China, is witnessing a remarkable shift in its transportation landscape. The narrow streets of Kathmandu, once dominated by the noise and pollution of traditional vehicles, are now seeing the emergence of electric vehicles (EVs) that glide quietly through the city. This transformation is not just a trend but a strategic move to address environmental concerns and economic challenges.

The transition to electric vehicles has been swift, with EVs accounting for 76% of all passenger vehicles and half of light commercial vehicles sold in Nepal over the past year. Five years ago, this figure was nearly zero. Today, Nepal’s EV market share is among the highest globally, trailing only a few countries like Norway, Singapore, and Ethiopia. The global average for EV adoption in 2024 stands at 20%, highlighting Nepal’s impressive progress.

This rapid shift is driven by a combination of government policies and external influences. Nepal’s abundant hydropower resources have made it an attractive candidate for electrification, reducing reliance on imported fossil fuels and mitigating air pollution. Additionally, the influence of China, a leading manufacturer of battery-powered vehicles, has played a crucial role in accelerating the adoption of EVs in the region.

Government Policies and Economic Incentives

Nepal’s government has implemented several measures to make EVs more accessible and affordable. Customs and excise taxes on EVs were set at a combined maximum of 40% in 2021, compared to 180% for gas-powered cars. This policy significantly reduced the cost of EVs, making them more competitive in the market. For instance, an electric Hyundai SUV now costs less than $38,000, while the gas-powered version is about $40,000.

To support the infrastructure needed for EVs, the Nepal Electricity Authority built 62 charging stations across the country, including in Kathmandu and on highways. The government also allowed private entities to establish chargers, imposed negligible tariffs on their import, and provided transformers at no cost. Additionally, electricity costs for chargers were kept below market rates, making it economically viable for businesses to install charging stations.

These initiatives have led to the establishment of approximately 1,200 charging stations, with many more installed in private residences. This growth has created new business opportunities for hotels, restaurants, and other roadside entrepreneurs, who have embraced the potential of EVs.

Challenges and Concerns

Despite the progress, Nepal faces several challenges in maintaining its momentum. The government has spent heavily on subsidies for EVs, and there is concern that reducing these incentives too quickly could hinder the transition to battery power. Moreover, even if gas-powered cars are phased out, cleaning the air will require public transportation to go electric as well.

The Asian Development Bank has been a key financier of Nepal’s energy infrastructure, including dams, transmission lines, and charging networks. However, the head of the bank’s resident mission in Nepal, Arnaud Cauchois, expressed caution about the risk of backsliding. While he believes the economic benefits of EVs make it unlikely for major policy changes to occur, he acknowledges that this is more of a wish than a conviction.

The Role of Chinese Manufacturers

China’s dominance in the EV market has had a significant impact on Nepal. The influx of Chinese EVs has introduced competition that has challenged local dealers and manufacturers. Many Indian-made vehicle dealers struggle to match the low prices and high quality of Chinese EVs, which are often priced at half the cost of Tesla models.

Yamuna Shrestha, a distributor for BYD, one of China’s largest EV manufacturers, saw the potential of EVs early on. After visiting BYD’s headquarters in Shenzhen in 2016, she secured the license to distribute their vehicles in Nepal. Her sales took off when BYD released cars that could travel farther on a single charge and were suitable for Nepal’s rugged roads. She now operates 18 dealerships and expects to sell 4,000 vehicles in 2025.

However, the growing competition from Chinese brands has raised concerns about the long-term sustainability of the EV market in Nepal. Auto dealers worry that faulty vehicles from smaller Chinese brands could damage the reputation of EVs. They are pushing for an independent agency to certify the safety and quality of EVs.

Future Prospects and Uncertainties

While the EV transition in Nepal is promising, there are uncertainties ahead. The young democracy has experienced political shifts, with three prime ministers in the past five years. These changes have led to shifting priorities, raising concerns about the stability of EV policies.

The central bank recently increased down-payment requirements for EVs, and the federal government has been gradually increasing tariffs on EVs due to declining revenues from car imports. Additionally, there is no clear plan for the collection and recycling of batteries, a critical issue for the long-term sustainability of the EV industry.

Businesses and advocates in Nepal remain hopeful but cautious. Rajan Babu Shrestha, a distributor for Tata Motors, has seen a surge in sales of electric models. However, he remains concerned about the future of EVs if subsidies or tariffs change. “It’s a very positive direction they are going in, but it really comes down to the long-term policy,” he said. “Stability is always a question mark.”

As Nepal continues its journey toward a cleaner, more sustainable transportation system, the success of its EV transition will depend on sustained government support, robust infrastructure, and careful management of the challenges that lie ahead.