Nepal Rastra Bank (NRB), the central bank of Nepal has introduced a reformed financial policy with reduced loan facility for buying electric vehicles (EVs). That results to the buyers to have down payment of 40 percent of the value of EV, which was 20 percent previously. The policy now changed the maximum loan-to-value (LTV) ratio to 60%, down from80%. The new policy, announced in the mid-term review of the monetary policy last week on February 25, Tuesday.
The revised rules also increase the LTV ratio for fossil-fuel-powered vehicles from 50% to 60%, providing some relief to internal combustion engine (ICE) vehicle sellers who had long lobbied for such changes.
The policy change is expected to impact EV sales, as consumers will now need to pay a higher upfront payment. It may also slow down the introduction of new EV brands and models in Nepal. Meanwhile, ICE vehicle dealers stand to benefit from the more lenient loan provisions.
So far, EV loans have been more favourable, covering a substantial part of the cost, which played a key role in boosting the adoption of electric mobility. However, by lowering the LTV ratio, the new policy might slow down the momentum of EV sales in Nepal.
As Nepal has soft policy on promotion of electric mobility in line with the global shift toward cleaner transportation and Nepal’s efforts to promote sustainable mobility, this decision could have a long-term impact on the EV market. By reducing financial incentives for EV buyers while simultaneously easing financing for fossil-fuel-powered vehicles, the NRB’s policy change may influence consumer preferences, potentially hindering the country’s progress toward greener transportation.
Nepal Automobiles Association of Nepal (NADA) has expressed dissatisfaction over the monetary policy for the fiscal year 2081/82 issued by NRB. NADA stated that the new policy will create significant challenges for businesses engaged in the electric vehicle (EV) sector, as per the press release issued by NADA.
According to NADA, “The mid-term review of the monetary policy for the fiscal year 2081/82 has set the loan-to-value (LTV) ratio for all types of personal and electric vehicles at 60 percent. As a key stakeholder in the automobile industry, NADA is deeply concerned about this decision.”
NADA further emphasized that the government has long prioritized green energy and has been providing special facilities for electric vehicles. However, the mid-term review of the monetary policy contradicts this approach and undermines the government’s commitments to clean energy.
NADA sees that this policy will lead to a decline in electric vehicle adoption in Nepal. To ensure compliance with the government’s declared policies and to safeguard investments in the EV sector, the association has asked NRB to maintain the previous LTV ratio of 80 percent for electric vehicles.
