The auto sector, which once contributed 23 percent to the country’s GDP, has seen its share decline to just nine percent.
This significant drop highlights a longstanding issue: the government has failed to recognize the importance of this sector, despite its sizable contribution to the national economy.
Currently, NADA (Nepal Automobile Dealers Association) is advocating for a reduction in vehicle taxes.
While this request remains unaddressed, industry stakeholders are content as long as tax rates do not increase.
There’s always a sense of hesitation when it comes to tax season, with concerns about potential hikes. This apprehension is particularly evident when monetary policies are introduced.
Over the past decade, the banking sector has been enthusiastic in its investments. During the first half of the year, when business is usually buoyed by festivals such as Dashain, there is considerable optimism.
Looking ahead, the auto sector’s growth prospects appear limited. In five years, we do not expect significant expansion. Yes, there will still be imports of electric vehicles (EVs) from China and India.
Auto shows are held, and there is a collective sense of excitement about the sector’s growth.
However, within six months, the situation shifts dramatically. The euphoria that prevails during Dashain soon gives way to disappointment as interest rates rise, and banks become reluctant to issue loans.
At one time, the banking sector was considered the safest area for investment.
This sentiment was reinforced by the banks themselves, yet today, this sector has become one of the least productive.
The reasons behind this drastic shift remain largely unexplored and warrant a serious debate.
The government has placed great emphasis on the energy sector, which holds promise for the future.
Electric vehicles (EVs) are poised to drive demand for this energy. Despite this, the auto sector’s development has stalled.
Of the 100 vehicles sold in Nepal, 72 are electric. While EVs were once the domain of second-time buyers, they are now being purchased by first-time buyers as well.
Prices have dropped, with good quality four- or five-seat EVs available for 30-40 lakhs, and even more expensive options are accessible.
There is ongoing discussion about whether the banking sector’s capacity has truly diminished.
Many of those facing blacklisting come from the auto sector, indicating that somewhere along the economic chain, a crucial link has been broken. Unfortunately, no real effort has been made to reconnect this chain.
I urge the banking sector to take note of these changes. Instead of the former approach of “I will pay the loan, clear my debt, and be free,” many now adopt the opposite stance: “I will not pay.” Why?
This shift reflects a broader issue within the auto sector, where some individuals are struggling with loan amounts ranging from five to one million rupees.
This growing problem speaks to a deeper societal issue—where failure to repay loans has become as stigmatized as a criminal record, forcing individuals to get a “character certificate” from the police before traveling abroad.
We have failed to fully recognize the deeper issues affecting society, including the tragic rise in suicides.
When a person takes their life, we rarely investigate what led to such a decision or what that person was going through. We do not understand the root causes of their despair.
In contrast, we are committed to conducting a clean and healthy business, especially within the auto sector.
In fact, the auto industry was the first to embrace online billing when it was introduced eight or nine years ago.
The auto sector, once a thriving industry, has become increasingly uncertain. My family has been in this business for over 40 years, and we have never encountered a situation as dire as the one we face today.
This sector has always aimed for transparency and integrity. However, despite these efforts, the auto sector has become one of the most neglected industries.
Looking ahead, the auto sector’s growth prospects appear limited. In five years, we do not expect significant expansion. Yes, there will still be imports of electric vehicles (EVs) from China and India.
However, EVs are not yet the dominant force in the market. Out of the 3,300 members of NADA, only about 200 are automobile importers.
The remaining 3,100 members are primarily suppliers of parts, tires, tubes, and lubricants. So, what is the banking sector doing to safeguard their interests in this context?
If banks lend money, they are expected to recover it. If payments are not made on time, withdrawing the deposit is a natural consequence.
But the question remains: are banks truly supporting the businesses they lend to? What measures are being taken to ensure these loans can be repaid?
The government, too, shares a significant portion of the responsibility.
First, it imposes economic policies that restrict the auto sector, then tightens monetary policies, effectively paralyzing the industry. Meanwhile, businesses are left struggling, with no way to stay afloat.
To illustrate this crisis, consider the state of foreign exchange reserves. Following the pandemic, reserves had fallen to a level where they could only cover the import of essential goods for seven months.
In response, strict measures were imposed on the automobile sector, including a ban on certain vehicle imports.
There was no greater blow to the auto sector than halting imports, as this also meant an inability to bring in essential auto parts.
Today, our foreign exchange reserves have doubled compared to that time.
Despite this, there are still no provisions to allow loans covering even 50 percent of a vehicle’s value.
If our reserves are now more than adequate, why are we still following outdated rules?
If electric vehicles (EVs) account for 80 percent of the market, why couldn’t we push for internal combustion engine (ICE) vehicles to make up 70 percent?
This situation calls for urgent reconsideration of both government policy and banking practices to better support the auto sector and its stakeholders.
Consider the hardships faced by those who rely on their daily earnings for basic sustenance. This is a reality everyone should take seriously.
During the Covid pandemic, the auto sector was one of the few businesses that thrived. While other industries saw a decline, the auto business experienced growth, with a 30 percent increase in demand for spare parts and lubricants.
However, after a year of leading NADA as president, my meetings with ministries, departments, and even police organizations have yielded no results.
Despite my efforts to explain the sector’s needs, it feels like I’m just playing a game of volleyball with these entities. Even when I presented the issue in court, there was no response.
In light of these challenges, I have gradually started exploring other business ventures.
The auto sector, once a thriving industry, has become increasingly uncertain. My family has been in this business for over 40 years, and we have never encountered a situation as dire as the one we face today.
If even large, established families are struggling, what does that mean for small business owners?
Consider the hardships faced by those who rely on their daily earnings for basic sustenance. This is a reality everyone should take seriously.
Looking back, I sometimes feel that I did not become president of NADA at the right time.
Every decision I make has turned into an uphill battle. But despite the obstacles, the effort continues, and we have not given up.
(Edited excerpt from Karan Chaudhary’s remarks at the ‘Challenges in the Banking Sector’ interaction program, organized by Khabarhub and the Institute for Strategic and Socio-Economic Research [ISSR] in Kathmandu)
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