Fearing a potential tax hike on electric vehicles (EVs) in the upcoming fiscal year 2025/26, Nepali importers rushed to stockpile EVs in recent weeks, significantly increasing imports through key customs points. However, the government’s budget, unveiled on May 29, maintained the existing tax structure—defying widespread speculation.

Nepal’s vehicle tax policy has shifted almost annually, revealing a lack of long-term consistency. For the current fiscal year 2024/25, the government raised taxes on EVs, with customs duties ranging from 15% to 80% and excise duties from 5% to 50%, depending on the vehicle’s specifications. Additionally, all vehicles are subject to a 5% road maintenance fee and 13% VAT.

In anticipation of a further increase, importers flooded the Tatopani and Rasuwagadhi border points with China, as well as the Chobhar Dry Port in Kathmandu, with EV shipments. According to the Department of Customs, Nepal imported 9,850 four-wheeled EVs—including cars, jeeps, and vans—worth Rs 23.09 billion, a 16% increase compared to the same period last year. Nearly 1,900 units arrived between mid-April and mid-May alone.

In Photos: EVs Flood Chobhar Dry Port Amid Whispers of Possible Tax Hike

But Finance Minister Bihnu Paudel, in a surprising move during the budget announcement, said the government would retain the current EV tax structure.

“To promote electric vehicle adoption, reduce environmental pollution, and boost domestic electricity consumption, all existing duties on EVs will remain unchanged,” he declared.

Paudel also introduced new incentives to support EV infrastructure. Equipment used to establish EV charging station manufacturing or assembling facilities will be subject to just 1% customs duty, with full exemptions on other taxes and a five-year income tax holiday.

Currently, over 7,000 EVs are estimated to be available in the Nepali market—comprising around 5,300 new imports in the past 45 days, with another 2,000 units already in stock.

The sudden influx has sparked speculation about a possible price war in the EV market due to oversupply and unchanged taxation. However, industry leaders remain cautious.

Yamuna Shrestha, Managing Director of Cimex Inc., authorized distributor of BYD vehicles in Nepal, said her company resisted panic buying and based its imports on actual market demand.

While competition might lead to price fluctuations, she does not anticipate drastic changes in retail prices.

“The government’s decision is encouraging. What the EV market really needs is a stable tax policy, which we’ve long advocated for,” she said. 

Anup Baral, Managing Director of Narayani Auto Business Pvt. Ltd. and a member of the NADA Automobiles Association, echoed the sentiment. He praised the government's policy but stressed the need for a long-term 10-year vehicle policy to achieve the national target of 95% private and 90% public EV adoption by 2035.

“The market may see short-term schemes or offers, but not necessarily permanent price drops. New import volumes could also see a temporary decline,” he added.

Similarly, Deepak Thapaliya, General Manager of Laxmi Intercontinental—the authorized distributor of Hyundai vehicles—welcomed the budget's support for EVs but questioned its long-term strategic vision.

“There’s nothing controversial in this budget, but the government still lacks a concrete industrial roadmap. We're still heavily reliant on imports,” he said.

Thapaliya argued that if Nepal truly aims to develop a domestic EV assembly industry, the government must go further.

“It could have reduced the road development tax for locally assembled vehicles or mandated that at least 50% of government vehicle purchases be assembled within the country.”

Meanwhile many view the new tax breaks for EV charging infrastructure as a step in the right direction. Encouraged by the budget, Cimex plans to expand its charging network across Nepal.

“This budget motivates us to grow our charging station network and related services,” said Shrestha.

Click  here  to see out budget 2025/26 coverage.