India's latest budget has raised the prospect of making Indian electric vehicles (EVs) more competitive in Nepal by reducing production costs. While Chinese EVs currently dominate the Nepalese market, India's decision to lower customs duties on key battery materials could lead to cheaper Indian EVs.
Presenting the budget for Fiscal Year 2025/26 in the Lok Sabha on Saturday, Indian Finance Minister Nirmala Sitharaman announced the removal of basic customs duty on critical materials for EV battery production and a reduction in duty on machinery required for battery manufacturing. The exemption applies to 12 materials, including cobalt, lithium-ion battery scrap, lead, and zinc. This move is expected to make domestically produced EV batteries more affordable.
"If EVs are produced at a lower cost in India, their prices will also decrease in Nepal, making them more attractive to buyers," said a Nepali seller of Indian EVs.
Nepali dealers note that Indian EVs are currently less popular than their Chinese counterparts due to higher production costs. Although Indian fuel-powered vehicles have long dominated Nepal’s market, Chinese EVs have gained a strong foothold in recent years. According to Nepal’s Department of Customs, 4,205 EVs were imported from China in the first six months of the current fiscal year, compared to just 1,050 from India. Last fiscal year, of the 11,701 electric four-wheelers imported, 8,065 were from China.
Chinese brands, including BYD, Neta, MG, Seres, and Ora, account for around 80 percent of Nepal’s EV imports. Meanwhile, Indian brands such as Tata Motors, Hyundai, Mahindra, and Kia are also present in the market, with Tata’s Punch and Tiago EVs performing well.
Indian Prime Minister Narendra Modi has emphasized EV promotion, highlighting plans to boost the production of components, electronic equipment, tires, energy storage, and automotive software. As part of this strategy, the Indian government has revised customs duties on EV-related equipment to lower prices. According to Indian media, companies like Tata Motors, Ola Electric, Log9 Materials, and Reliance Industries will benefit directly. India aims to increase EVs' share in total vehicle sales to 30 percent by 2030.
Jewelry to Become Cheaper
India's new budget has also reduced customs duty on jewelry imports from 25 percent to 20 percent, which will lower jewelry prices in the Indian market.
Nepali gold and silver traders warn that this could encourage cross-border purchases, affecting local sales. Diyash Shakya, vice-president of the Federation of Nepal Gold and Silver Dealers Association, noted that India's last gold import duty reduction in July had a 50 percent impact on Nepal’s market. While Nepal’s Finance Minister Bishnu Poudel recently reduced gold import duties to stabilize prices, Shakya stressed that further policy adjustments might be needed to prevent disruptions.
Tax Relief for the Middle Class
The budget also provides significant tax relief for India's middle-income population. The exemption threshold for annual income has been raised to INR 1.2 million, with a standard deduction of INR 75,000. This means individuals earning up to INR 1.275 million annually will not be subject to income tax.
For senior citizens, the tax exemption limit on interest income has been increased from Rs 50,000 to Rs 100,000. Sitharaman also announced plans to introduce a new Income Tax Bill next week.
The Modi government has gradually increased tax exemptions over the years, raising the limit from Rs 250,000 in 2014 to Rs 500,000 in 2019 and Rs 700,000 in 2023. Some economists consider this the most significant tax reform in a decade.
