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Tue, March 5, 2024

THE EV MARKET PROS & CONS

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The market for electric vehicles (EVs) in Nepal has seen tremendous growth in recent years. As per data of the Department of Customs, the country imported 3,070 EVs worth Rs 11.23 billion in the first 11 months of fiscal year 2022/23, which is an increase of 122% compared to the same period in the previous fiscal year.

The White Paper 2018, released by the Ministry of Energy, Water Resources and Irrigation states, “By 2023 half of the vehicles imported in the country will be electric.” The Periodic Plan 2019-2023 of Bagmati Province has also announced the removal of all fossil fuel vehicles from four urban centres – Kathmandu Valley, Chitwan, Hetauda and Kavre – by 2028.

Globally, sales of electric vehicles are expected to continuously grow strongly. Worldwide, over 2.3 million electric vehicles were sold in the first quarter of 2023, about 25% more than in the same period last year. Sales of EVs are expected to touch 14 million by the end of 2023, representing a 35% year-on-year increase with new purchases accelerating in the second half of the year. 

With demand rising, the market for EVs has subsequently become more competitive. A growing number of new entrants, primarily from China but also from other emerging markets, are offering more affordable models. Major incumbent carmakers, especially European automobile companies, have also shown a growing interest in electric vehicles. 

Though Nepal does not manufacture EVs, it has become a major market for imported variants and the reason behind this is due to their affordability, which has been possible because of the lowering of customs duties. “There are various unique factors driving the surge in EV demand in Nepal. Foremost among them is the significant reduction in customs duties for EVs. This policy decision has brought the price of EVs closer to that of internal combustion engine (ICE) vehicles, where customs duties are considerably higher,” said Gaurab Raj Pandey, Manager-Research and Development, thee GO, adding the more affordable price point has made EVs accessible to a wider range of consumers.

“Another compelling factor is the lower operating and maintenance costs associated with EVs. These savings over the lifespan of the vehicle make EVs an attractive proposition for Nepali consumers,” stated Pandey. “We have also witnessed the introduction of high-quality EV models into the Nepali market. These vehicles offer state-of-the-art features, safety, and performance, which resonate with discerning consumers,” he added. 

Ram Chandra Poudel, Director of the Ministry of Physical Infrastructure and Transport, said, “People appreciate EVs because of the various features such as performance, safety, the latest technologies they come with and most importantly the environment benefits,” adding, “EVs play a great role in controlling emissions, in fact, they do not emit any toxic fumes at all. If we could have electric public vehicles, then we will no longer have air pollution due to combustion. On top of that, we will also be able to save on the fuels we import which runs into billions of rupees every year. For a normal city dweller, Rs 200 worth of charge can operate the EV for at least a week.” 

Many developing countries in Asia, Africa, the Caribbean, Oceania, Europe and South America have adopted EVs in recent years and research shows that more than half would benefit economically through electric mobility. In some countries the higher investments in EVs initially balances out through the lower operational cost. However, many find EVs expensive and refrain from buying because of the initial purchasing cost, low resale value and battery lifespan. 
“EVs can be somewhat costlier than their equivalent internal combustion engine counterparts. However, I would like to highlight that over the past few years, the situation has evolved significantly,” mentioned Pandey, adding, “Five years ago, the cost might have been a significant barrier, but as of now, I do not see it as a major issue.” He further emphasised it is worth noting that lithium batteries, which are commonly used in electric vehicles, can have a lifespan of up to 15 years under normal usage conditions. “Even after this period, the batteries can find a second life and be repurposed. I am confident that new companies will emerge to utilise these lithium batteries and customers may even have the option to sell their batteries, providing added value,” he stated.

Pandey further said that he acknowledges the concern about the resale value of electric vehicles but it is a common phenomenon with new technologies and we have seen similar situations with diesel and petrol vehicles during their early days. “However, as more and more people embrace electric vehicles, their resale value will naturally increase. It’s a matter of time and adoption,” he stressed. 

“The cost of manufacturing an EV is pretty high and the price of batteries too is expensive, as a result of which EVs are pricier and people choose vehicles that operate on fossil fuels. Most people also believe they will not be spending Rs 15 lakhs on fuel in five years, the average battery lifespan after which it needs to be replaced,” said Anup Baral, Managing Director, Narayani Auto Business. “But again, I want to emphasise that we all should be encouraged to believe in the development of technology and the cost of a battery will surely be affordable in the next five to 10 years. I agree that the resale value of EVs at present is very low but I also want to add that if second hand EVs are traded in volume then the resale value will increase,” he stated.  

Meanwhile, Poudel said, “The initial cost of EV is high and the average Nepali customer cannot afford it. Combustion engine vehicles might look cheaper but again if we calculate all the expenditure on fuel, it comes to the same as the initial cost of an EV. Even if we reduce the customs duty on EVs to zero, the selling price of an electric vehicle will be double that of a petrol or diesel engine vehicle.”

To encourage the use of electric vehicles the government has reduced their customs duty, states Poudel. “The customs duty on other vehicles is around 270% to 300 % but when it comes to EVs then the customs duty on two-wheelers has been reduced to 24.3%, and for four-wheelers with 50-kilowatt-hour battery also it is the same. Four-wheelers with over 300-kilowatt-hour battery face customs duty of 200%. The customs duty charged for micro buses is 14.13% only. Even though the customs duty has been reduced, EVs are still expensive,” he said.

Nepal’s economy is largely reliant on fuel imports. The encouragement to use EVs will definitely impact fuel import. According to data of Department of Customs for fiscal year 2022/23, the country spent Rs 321 billion on petroleum imports which reveals that our economy is largely dependent on imported fuel. Therefore, with the benefits that EV provides to the environment, it will also provide a possibility to reduce fuel dependency and the ever-increasing trade deficit. 

Further, the government has emphasised EVs and planned to provide 100% electricity access to its population in the coming two years. It is working on several initiatives to promote EVs. In context to infrastructure development, multiple private sector businesses have also started working on establishing charging stations to provide more accessible e-mobility. But again, people are hesitant to take their vehicles to remote areas because of the unavailability of charging stations and load-shedding. According to Pandey, “Nepal Electricity Authority (NEA) has already established 51 fast charging stations throughout Nepal, and their commitment to expanding this network is commendable. However, there’s room for growth, and we should aim to have fast charging stations within approximately every 40 km to alleviate range anxiety among consumers.” 

Baral added that if brands start increasing their trust and faith by providing higher range batteries to their customers then we can think of a good environment for EVs. “People tend to have greater confidence in buying EVs which have longer battery range as they will not have to worry about recharging,” he stated, adding, “People might start having range anxiety if this is not addressed on time.”

Another aspect that also features in discussions related to electric vehicles is the e-waste that could be generated when batteries expire. According to Global E-waste Monitor 2020, Nepalis tossed out 28,000 tonnes of electronic waste consisting of unusable phones, computers and TV sets in 2019. Most of the e-waste is dumped in landfills or sold to scrap dealers and very less go for recycling. The increasing number of EVs will also contribute to the increasing number of e-waste and to manage this, Nepal does not seem to have any concrete plan. EV batteries contain elements such as lithium, cobalt, nickel and many other elements. These batteries are harmful to the environment and human health if not disposed of properly.

“We have a blind economy where we consume imported products but have no lifecycle planning. Previously, during the load-shedding era expired batteries of inverters were also given to scrap dealers and they used to throw the acid in the mud which harms the soil and used to take the covers to India, get them recycled and used for new batteries,” said Poudel. He adds that we have never had an organised way to recycle our batteries and we still don’t have one.

“We do not have the technology that can help recycle lithium ion. If we do not start working in this regard, this is going to become a very big problem in the near future. In other countries, such batteries are used as power banks and are charged through solar panels,” Poudel shared, adding, “In that way, batteries have been kept as an energy storage mechanism. The only solution that I see in Nepal is that the battery should be returned to the country from where the respective EVs are imported. We do not have any system. Even if we try to store, the waste increases. The batteries in the EVs are bigger in size and after six to seven years, the battery stops working by 80%,” he shared.  

Pandey, on the other hand, stated, “I would like to emphasise that there’s no immediate need for worry, at least for the next five years. Instead, our focus should be on exploring opportunities for battery pack reuse and recycling. Most EVs come with an eight-year warranty on lithium ion battery pack and they typically have a lifespan of 12 to 18 years if used for normal commute. Under normal usage a lithium ion battery pack can last for up to 15 years on average.”

“When a battery’s State of Health (SoH) decreases by around 30 to 40%, it may no longer be suitable for mobility use, however, it can find a valuable second life as an energy storage system (ESS),” shared Pandey, adding, “These repurposed batteries can be utilised in homes, office buildings, and even in power stations to support the grid supply during peak demand. This represents an excellent and sustainable use of EV battery packs, potentially extending their usability for another five to 15 years, depending on their condition.”

However, as of today, the EV industry in Nepal has not fully developed a mechanism for the second life use, recycling, and proper disposal of EV battery packs, said Pandey. “E-waste management is a growing concern globally, and Nepal is no exception. Nepal is also engaged in e-waste management but the current efforts are not sufficient to keep pace with the growing amount of electronic waste. I see a tremendous business opportunity in e-waste management and believe it’s an area where we can make a significant positive impact on the environment and the economy,” he added.

Nepal is yet to develop a proper management plan for the recycling of e-waste. The Solid Waste Management Rules, 2013 has made provisions for the management of harmful and chemical waste but this does not provide the management for e-waste. It is also believed that producers and manufacturers are the ones who should be looking after the management plan. “While announcing this year’s budget, the government stated that importers must submit their battery management plan to the customs office before entering the country,” said Poudel. 

On the other hand, Baral stated that though the government has appealed to importers to submit the battery management plan to the customs office, the following offices do not have the potential to analyse the planning as well as the depth of the problem. 

Therefore, with no plans for e-waste management we must think on whether the push to adopt environmentally-friendly alternatives would be actually sustainable or create more issues. 

Another concern for EV owners in Nepal are the roads, which are poor in quality and there is lack of management during the monsoon and this is one area the government should prioritise. Pandey emphasised, “The importance of quality roads cannot be overstated, particularly for electric vehicles. Smooth and well-maintained roads not only enhance fuel efficiency for combustion engine vehicles but also reduce battery consumption in EVs.” Additionally, it minimises the wear and tear on EVs, ultimately reducing repair and maintenance costs, he added. “While Nepal’s road network has expanded significantly over the past decade, we still face challenges related to high-quality roads, and it’s an area that the government should look into with utmost priority,” he stressed.

Along with the rise in use of electric vehicles the concept of hybrid vehicles is also gaining a foothold globally. According to a report published by Statista, “It is expected that by 2025, global production of hybrid electric vehicles will grow to around 5.4 million units. Hybrid electric vehicles are powered by an internal combustion engine and one or more electric motors, which use energy stored in batteries. The battery is charged through regenerative braking and by the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine. The battery can also power auxiliary loads and reduce engine idling when stopped. 

On hybrid electric vehicles, Pandey said, “In the context of Nepal, where the topography is diverse, including rough hilly terrain and mountain routes, hybrid vehicles may offer certain advantages, especially for long drives. The combination of the internal combustion engine and electric motor can provide the needed power and range for such challenging terrains. Those who frequently embark on long drives or navigate rugged terrains, hybrids may be a better fit.”

The number of people buying EVs in Nepal has been rising steadily and there probably is no stopping this trend. Every other month, newer versions with more advanced features are being imported. Also, many people are exchanging their fossil fuel vehicles for electric vehicles. However, for a more sustainable EV market in the country, the government along with the stakeholders need to have a comprehensive approach that addresses various aspects of EV adoption considering the different terrain and climate conditions of our country. The one good aspect for Nepal is we have an abundance of hydropower potential. Thus, if Nepal utilises its full potential and minimises the problems such as load shedding then it can encourage more EV buyers as we can set up more charging stations which can be operated at full capacity. Baral further mentioned that if charging stations are not fully maintained and managed then there is a high chance of getting electric shocks which can be life threatening too, which is another aspect that needs to be seriously looked into.

Another aspect that the government needs to focus on is developing the standards for electric vehicles. There are a few standards mentioned by the government but they are not specifically designed for EVs. Pandey mentioned that one crucial step to make EV sustainable in Nepal is to establish standards for charging protocols and electric vehicle performance that are suitable for our diverse terrain and climatic conditions. “This will ensure that EVs can perform optimally in the challenging conditions found in Nepal,” he asserted. 

Battery management policy is another area that the government should really work on. As per Baral, “For long-term sustainability of EVs in Nepal, representatives from government and dealers and suppliers must sit for a meeting to plan the management policy.” Pandey further added, “Developing policies and standards for the reuse, recycling and proper disposal of EV batteries and other electrical components is vital. This ensures that as EV adoption grows, we can manage waste responsibly and sustainably.” 

“Though not in our hands because we import the vehicles, it would be nice to have a broader range of EVs so that they can be imagined in rural places in Nepal too, said Baral. He emphasised that the battery range should be increased. “An EV becomes easier when the batteries are made smarter with a long charge holding capacity. Also, the charging stations should be faster so that we can better imagine a smart electric world,” he added. Pandey further stated, “To alleviate range anxiety and encourage EV adoption, we need to promote the development of fast charging stations. Having a charging station within every 40 km along major routes will make EVs more practical for long-distance travel.”

One other aspect that needs to be promoted is increasing the number of public electric vehicles and the government has reduced customs duty on public EVs to encourage its use. Poudel asserted, “If we invest in bigger-capacity EVs such as trolleybus, metro, railway and cable car where a huge quantum of electricity is consumed and better service is provided to the public as they are the ones benefiting directly then it will be meaningful. But if we invest in cars and scooters and do not look into battery management then batteries will be discarded in a haphazard manner and if the lithium ion leaks into the soil, it will create pollution which becomes a long-term effect.”

Another area where stakeholders need to focus on is training and educating the masses. Most people are buying electric vehicles without appropriate knowledge about them. Therefore, it is crucial to make them understand the potential benefits and risks of EVs. Baral emphasised, “EV literacy is one most important thing that will help promote EVs in a more sustainable way. This is not the responsibility of the government only. Every stakeholder is responsible for this. The dealers and suppliers must make buyers understand about EV. In the process of providing education on EV, let us also keep in mind that the right information flows.”

With proper initiatives, policies, plans, investments and commitment, a more prosperous future for electric vehicles can be imagined in Nepal, but the associated risks should also be taken into due consideration. Today an environmental solution, tomorrow it should not turn into an environment hazard. 

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JANUARY 2024

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