The global electric vehicle (EV) revolution is rapidly transforming the automotive landscape. According to the Global EV Outlook 2025, over 17 million electric cars were sold worldwide in 2024, accounting for more than 20% of new vehicle sales. China leads the charge, with nearly half of its new cars being electric, followed by Europe at 20% despite subsidy cuts, and the US steadily growing, with 1.6 million EVs sold last year. Meanwhile, emerging economies in Southeast Asia and Latin America are catching up, driven by affordable Chinese imports and supportive policies.
This surge is fueled by two major factors: sharply declining battery prices and expanding charging infrastructure. Battery costs dropped by nearly 30% in China and 10–15% in Europe and the US in 2024, bringing EVs closer to price parity with traditional internal combustion engine (ICE) vehicles. Globally, public charging stations have doubled over the past two years, with ultra-fast chargers increasing by 50%, improving convenience and strengthening the business case for electric mobility.
Nepal’s EV market, though still small, is showing promise. The government has set ambitious targets to increase EV sales to 90% and 95% for all private passenger vehicles (including two-wheelers), and to 70% and 90% for all public passenger vehicles by 2030 and 2035, respectively, in line with its Nationally Determined Contributions (NDC) 3.0 under the Paris Agreement. With abundant hydroelectric power, Nepal can fuel EVs cleanly, helping to reduce urban pollution and dependence on imported fossil fuels. EV imports surged by 16% in the first ten months of fiscal year 2024–25 compared to the same period last year, reflecting rising consumer interest.
Policy Inconsistencies Undermine Progress
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Despite these developments, Nepal’s EV transition faces major challenges — chiefly, inconsistent fiscal and monetary policies that send mixed signals to buyers, investors, and manufacturers. Fiscal incentives such as tax exemptions and reduced import duties initially helped jumpstart the market. Nepal offered generous customs, excise, and VAT reductions for EVs, boosting affordability and imports—primarily from Chinese manufacturers, who now hold over 74% of Nepal’s EV market.
However, this positive momentum has stalled. In fiscal year 2024–25, the government sharply increased customs and excise duties on EVs by up to 80%, depending on motor capacity, raising prices by about 10%. This reversal came just as market interest was growing, undermining affordability. The removal of tax exemptions on locally produced vehicle parts threatens domestic assembly and manufacturing, missing a chance to foster a green industrial base and create jobs.
On the monetary side, Nepal Rastra Bank’s (NRB) 2025 decision to reduce the loan-to-value (LTV) ratio for EV financing from 80% to 60% further restricts access to credit. This move increases upfront capital requirements, hitting low- and middle-income buyers hardest—precisely the segment crucial to scaling EV adoption. The Nepal Automobile Dealers’ Association criticized the step, noting it contradicts government goals and could dampen demand.
Although NRB has introduced green refinancing facilities at concessional interest rates (5–7%) and encouraged banks to prioritize EV lending, the reduced LTV ratio offsets these efforts. The lack of a consistent and supportive financing environment creates uncertainty for consumers and investors alike. Another significant issue is the insufficient budget allocation for environmental and EV infrastructure initiatives. In 2024–25, environmental programs received only a tiny fraction of the total fiscal budget. Though Nepal has installed around 400 public charging stations with plans to double this number, funding gaps threaten to stall the infrastructure buildup essential for widespread EV adoption.
Toward a Coordinated and Long-Term Policy Framework
To unlock Nepal’s EV potential, a fundamental shift in policy coordination is critical. Fiscal and monetary policies must be harmonized within a clear, consistent, and long-term strategy aligned with national development goals and climate commitments.
Fiscal policy should offer stable and predictable incentives. A tiered tax regime based on battery size, vehicle price, or emissions intensity can encourage adoption while ensuring fairness. Strong exemptions or subsidies for local assembly and component manufacturing would stimulate a green industrial sector, reduce import dependency, and create employment opportunities. Increasing budgetary support for charging infrastructure and promoting public sector EV procurement would further boost demand and set a leadership example.
Monetary policy should actively facilitate green financing. NRB can require banks to allocate a portion of their loan portfolios to sustainable transport and develop affordable loan products with subsidized interest rates. Relaxing eligibility criteria for refinancing facilities would help small businesses and cooperatives enter the EV market, broadening access beyond urban elites. Simplified loan processes and extended repayment terms would also ease consumer uptake.
Effective coordination among key institutions—the Ministries of Finance, Energy, Environment, and Industry, along with NRB—is essential to align policies, share data, monitor progress, and adapt strategies based on market realities. A transparent EV roadmap with clear targets, timelines, and accountability will provide stakeholders with confidence and guidance.
Nepal’s rich hydroelectric resources uniquely position it to lead South Asia’s low-carbon transport transition. Rising consumer interest and favorable global trends offer a rare opportunity to accelerate EV adoption—but only if policymakers act decisively and coherently. Failure to align fiscal and monetary policies risks losing market momentum, stalling industrial development, and falling behind global peers embracing green mobility. By adopting an integrated and consistent fiscal–monetary approach, Nepal can transform its transport sector, cut urban pollution, enhance energy independence, and build a sustainable economy. The time to act is now.
