What next for public vehicle electrification?

Electric vehicles (EVs) accounted for only one percent of the total vehicle fleet in Nepal in 2020. However, their popularity is increasing, presenting a significant opportunity for the private sector to invest and create a favorable environment for EVs. This entails establishing an adequate number of charging stations, implementing vehicle standards, and crucially, ensuring accessible financing systems.

According to data, the import of electric vehicles during the first 10 months of the current financial year amounted to Rs 8.41bn, resulting in customs revenue of Rs 2bn for the government. In contrast, the annual import cost for petroleum-powered vehicles is reported to be Rs 100bn. While the use of electric vehicles is gaining momentum, their integration in public transportation remains low in Nepal. 

“Anyone who has tried public transport in Nepal knows it can be difficult, that’s why many people in the country use private vehicles. That creates its own issues like traffic congestion, accidents and not to mention more use of fossil fuels to power vehicles,” says Martin Holtmann, IFC Country Manager for Nepal, Bangladesh and Bhutan. “The problem has worsened over the years, with vehicle emissions being one of the three main sources of air pollution in Kathmandu Valley.” The transport sector is also the largest contributor to Nepal’s greenhouse gas emissions. So, it’s time to think of electric mass transit as a means of helping people get around cities in a way that’s better for the environment. “Nepal has the advantage of hydropower—a renewable energy source to meet its energy needs and what better way to use that natural resource than to power mass transit?” adds Holtmann.

Various companies, including TheeGo, Mahindra, BYD, Kia, MG, Hyundai, Tata, and Nissan, are selling electric vehicles in Nepal. However, to reduce imports and enhance self-sufficiency, it is crucial to establish domestic production of electric vehicles.  Electrification of commercial vehicles is the need of the hour, says Rajan Rayamajhi, MD of TheeGo. “A 11-seater commercial vehicle runs around 300 kilometers daily and consumes around 40 liters of diesel. It could easily be displaced by an EV,” he says the commercial EVs give a larger profit margin to the bus owners.

“The private sector is doing well to support electrification drives but the government policy, banks and lawmakers only see private passenger vehicles as EV.” Mulkot, where TheeGo has installed charging stations, became the second largest electricity consumption of Sindhuli district. “Due to the lack of stability in our policies and plans, commercial EVs are ignored,” Rayamajhi adds.

The recent budget has imposed tighter customs duties on electric vehicles compared to the previous year. The exemption on excise duty for vehicles up to 100 kW provided in the previous budget has been reduced to vehicles up to 50 kW. Additionally, a 15 percent customs duty and a 10 percent excise duty have been levied on vehicles ranging from 50 kW to 100 kW. These changes resulted in a surge of electric vehicle imports up to 100 kW in the past year. Contrary to expectations of a more lenient import policy for electric vehicles, the government has increased tax rates despite encouraging their use.

Compared to the previous year, customs duties have been reduced by 10 percent and excise duties by 20 percent for vehicles between 100 kW and 200 kW. Customs duties for vehicles between 200 kW and 300 kW have been lowered by five percent to 40 percent, while excise duties remain at 45 percent of the previous year’s rate. Vehicles above 300 kW still face a tax rate of 60 percent.

Furthermore, the current budget has eliminated the tax exemption previously granted to the local vehicle manufacturing industry for importing parts. This move has raised concerns among experts, as it may discourage the establishment of new industries. Although domestic electricity production is increasing, there is wastage during the rainy season due to limited consumption capacity. With a commitment to achieving zero carbon emissions by 2045, the government asserts that all vehicles, whether imported or domestically produced, will eventually be electric.

Rather than increasing import taxes, the government should focus on creating a supportive environment for domestic electric vehicle production, says expert. “Commercial EVs drive has just started in Nepal but the recent increase on custom duty has disappointed the consumers and private stakeholders,” adds Rayamajhi of TheeGo.

The Nepal Electricity Authority (NEA) predicts a rise in electricity consumption during the winter season in the coming years, in addition to the current increase during the rainy season. Increased consumption is influenced not only by household electricity usage but also factors such as the growth of factories and the adoption of electric vehicles. Consequently, the government should prioritize efforts to boost the production and usage of electric vehicles. By expanding the production of EVs and encouraging domestic consumption, the import of petroleum products can be reduced. This, in turn, would contribute to decreasing the trade deficit with India, potentially saving over Rs 200bn annually in reduced petroleum imports.

Establishing an electric vehicle plant leads to technology transfer, bringing the latest high-level technology to Nepal. Introducing new practices in the industrial sector also raises awareness about the importance of technology in other industries. “The initial focus for electrification could be on two- and three-wheelers as they make up 80 percent of Nepal’s vehicle traffic. Then the focus can be shifted to public buses,” suggests Holtmann. “The move to a greener urban transport will require coordination between the public and private sectors, and between the federal and local government levels. This may need some effort, but it is a plan worth considering to help Nepal cut off its reliance on fossil fuels… and deliver a resilient and sustainable future.”

Currently, TheeGo primarily operates public electric vehicles. Sajha Yatayat has imported 40 electric buses from China but has faced challenges in providing services with only six of them. The lack of charging stations and other infrastructure limitations in the valley have forced these buses, purchased for approximately Rs 560m, to remain idle in parking spaces in Banepa, Lalitpur, and Pokhara.

Recently, electric microbuses and vans have been introduced for long-distance public transport, mainly operating on the BP Highway. However, government cooperation and support in this regard seem unpromising. Sundar Yatayat, which previously operated around a dozen public electric buses within and outside Kathmandu Valley, halted its electric bus service in Feb 2023 due to a lack of government cooperation. The company cited the government’s failure to implement the NEA’s decision to waive demand fees for EV charging stations as the reason for its decision to discontinue electric bus services.

Global electric bus scenario 

Since 2020, there has been a notable rise in the popularity of electric buses. Global sales of electric buses reached approximately 66,000 units in 2022. The dominant force in this market is China, accounting for over 80 percent of all electric bus sales worldwide. Moreover, China stands out for its prowess in electric bus manufacturing and serves as a significant exporter to Latin American, North American, and European nations.

Within the European Union, the Clean Vehicles Directive sets targets for the adoption of electric buses in public procurement. Several EU countries, including France, Germany, and Spain, have witnessed a surge in electric bus sales. Finland, in particular, achieved the highest sales share of electric buses in Europe in 2022, with electric buses accounting for over 65 percent of total sales.

By 2030, according to the Stated Policies Scenario (STEPS), the global number of electric vehicles (excluding two/three-wheelers) is expected to reach around 240m, constituting more than 10 percent of the total global vehicle fleet. In a more ambitious scenario known as the Announced Pledges Scenario (APS), it is projected that nearly 250m electric vehicles will be in operation globally by 2030. Moreover, electric vehicle sales are anticipated to represent over 35 percent of all vehicle sales during that period.

The Net Zero Emissions by 2050 Scenario (NZE), which aims for a more aggressive transition to electric vehicles, predicts that the global electric vehicle stock will reach 380m by 2030. Furthermore, electric vehicle sales are expected to account for 60 percent of all vehicle sales during that time frame. These scenarios by the International Energy Agency (IEA) outline varying degrees of electric vehicle adoption and provide different outlooks for the future, depending on the level of policy implementation and commitment to achieving net-zero emissions.