Nepal is a country where development has just started to pace up and the government has primarily put its focus on roadways. It has brought massive increment in the number of vehicles on the road. Moreover, the demand for private vehicles has soared like never before.
Rent a Cars are expensive in Nepal primarily due to the high import taxes levied on vehicles when brought into the country, including customs duty, excise duty, and VAT, which significantly inflate the price of a car compared to its cost in neighboring countries like India; essentially, the majority of the cost of a car in Nepal is attributed to taxes rather than the base vehicle price itself.
In this article, we will lay out the main 4 reasons behind rent a vehicles high prices of automobiles in Nepal. Furthermore, below we discuss the current vehicle policies in Nepal that have played a significant role in escalating its costs.
No Domestic Production
The first and foremost factor affecting directly raising the automobiles price in Nepal is there is no domestic production. Nepal hasn’t a single place in the list of global automobile manufacturers. Everybody knows that manufacturing goods at the national level utilizes local resources and manpower. This reduces the production and assembly cost which further lowers the vehicle prices when they reach the market. As there is none, prices are sure to go high.
Further, with no internal production, the Nepalese automobiles market totally depends upon global manufacturers for delivery. While setting deals on international lands and their policies, the market price is set according to exchange rates of foreign currencies which further increase the price. Moreover, as there are no assembly facilities over the country, pre-assembled vehicles should be imported which are more expensive than unassembled ones.
In a word, no domestic production and assembly facilities force automobile companies to import fully assembled products which are very costly compared to semi-assembled ones.
International Import
As there is no internal manufacturing, every vehicle running on Nepalese highways is bought up from the international market. This situation of importing ready-made vehicles from abroad has introduced unwanted profit-yearning layers on a producer-to-customer market chain. As a consequence, margins from multiple distributor-hierarchies get stacked on top of one another finally presenting an over hiked rate to the customers.
For instance, an importer first brings in the automobiles at an inflated price from abroad and sets a wholesale price for distributors. The distributors then impose certain profit scaling on the wholesale cost price and hand it over to dealers and showrooms which further raises the cost price of a vehicle before handing it over to the customers.
In short, little profit droplets from numerous business layers accumulate to create a huge difference between the original price while importing and the market value.
Heavy Custom Duty
Another crucial factor helping to escalate automobiles price is the heavy customs duty imposed while importing. The government of Nepal hasn’t been friendly about allowing vehicles to get through the national borders. The importers have to pay a huge sum of money to the customs department while registering the international vehicles.
To reveal the exact figures, according to the fiscal budget of GOV.NEPAL for the year 2023-24, imported vehicles are subjected to astronomically high tax rates ranging from 288% to 308%. The exact tax amount is determined by the automobile’s engine displacement and its source country. Further, the import tax can be split into sub-headings like custom duty, excise duty, VAT, and road construction tax. Contrasting this percentage with western countries like the USA and the UK, these latter countries take almost nothing. The accurate fractions are 2.5% for the USA and 10% for the UK.
In fact, vehicle import tax has been a major source of national revenue for Nepal’s government.
Excessive Vehicle Tax
On top of that, the tax is to be paid every year along with insurance fees, further burdening the shoulders of customers. Moreover, this tax is totally unique and paid annually and is not included in custom duties while an automobile is bought.
In the meantime, neighboring countries like India are levying a one-time tax payment during the registration of newly bought vehicles. A single installment of a definite sum is much better than a continuously increasing yearly tax system.
In a word, an annual vehicle tax apart from the customs duties further increase the cost price of vehicles in Nepal.
