Shifting Gears To Drive Business

Akash Golchha, a name synonymous with the automobile business, is the Director of Golchha Organisation, one of the country’s leading conglomerates. With a family legacy in the automotive sector spanning nearly six decades, Golchha has been actively involved in the business for over 25 years. His journey in the industry began at a young age, growing up in an environment surrounded by cars and witnessing firsthand the growth and evolution of the automotive market in Nepal. As the Senior Vice President of NADA Automobiles Association of Nepal, Golchha’s leadership and team effort have been instrumental in navigating the changing landscape of the automobile industry, particularly as it transitions towards electric vehicles.  

With a deep passion for automobiles and extensive work experience, he continues to drive innovation and growth in one of Nepal’s most competitive and fast changing industries. In this edition of Business 360, we spoke to Golchha to delve into his long-standing passion for automobiles while gaining insight into how he manages the changes shaping Nepal’s automobile industry from emerging technologies to shifting consumer preferences.

When did you enter the automobile business?

My family has been in the automotive business for over 50 years. Around 2014 or 2015, we celebrated 50 years, and now it’s been almost 60 years. I joined the business about 25 years ago, so by that time, we had already been in the automobile industry for 35 years. Even before I was born, we were dealing with cars. My whole family is passionate about automobiles; we have always loved driving and learning about cars from a young age. My interest in automobiles really started in my childhood.

Growing up, I would see people coming to our house because back then, we didn’t have a proper showroom. We used to sell cars from our residence in Ganabahal. We had a parking lot of where new cars were kept and people would come to buy them there. I watched people come to negotiate and buy cars, so it was something I was exposed to from a young age.

After joining the business, I initially spent the first two years in other industries but eventually, I transitioned into the automobile side as my father was looking after Datsun and SsangYong at the time, so I gradually became involved. My first dealership was with Proton which marked the beginning of my journey in the automotive industry.

I always thought EVs would gradually rise in popularity, but that petrol and diesel would continue to hold a significant share for some time. The shift has been faster than anyone expected, and for most automobile dealers, the choice is clear: either adapt to selling EVs or risk going out of business.

As a leading distributor of automobiles in the country with decades of experience, how would you describe the current state of the automobile market in Nepal? What trends are shaping customer preferences?

There has been a significant transformation in the automobile industry. In the past, we only had petrol and diesel models, but over time, petrol-powered vehicles have become more dominant in the passenger car segment as the price gap between petrol and diesel narrowed. Over the last decade, electric vehicles (EVs) started making their way into the market. The first EV we saw was the Reva, and even before that, around 2008-2009, the Hulas brand developed an electric vehicle. This was supported by Winrock International, and my uncle, Surendra Golchha, developed an electric van under Hulas Motors. It was a green-coloured van that some people may still remember or find on Google. Back then, we used lead-acid batteries which were heavy, and the vehicle wasn’t viable due to the high production costs. Even though it was locally made, the parts and motors had high duties, making it too expensive. Moreover, EV adoption wasn’t great at the time, and the range was only about 60 to 70 km, which wasn’t sufficient. As a result, we couldn’t take it into mass production, and the commercial viability wasn’t there. Later, the Reva was acquired by Mahindra, and the first larger electric car to hit the market was from Kia. Gradually, EVs started gaining traction, and by 2019, we began seeing a few electric models in the market, with growing acceptance among customers.

Then Covid happened, and despite fluctuations in duties, there has been an unexpected and drastic shift.

I never imagined that EVs would dominate the market to the extent that they now do. Today, around 80% of the passenger car market consists of electric vehicles which is something I could never have predicted. I always thought EVs would gradually rise in popularity, but that petrol and diesel would continue to hold a significant share for some time. The shift has been faster than anyone expected, and for most automobile dealers, the choice is clear: either adapt to selling EVs or risk going out of business.

What is Golchha Organisation’s strategy to stay competitive in an increasingly crowded automobile market?

It is challenging to remain competitive. Among our brands, I am handling Ford. My brother is managing Peugeot, Citroen and a new brand called LeapMotor.

We have many backend operations, including numerous teams and people in logistics and other areas. All the showrooms and marketing teams are separate, but many backend operations are shared. We help each other out. For example, with EVs, there is a requirement for charging stations. I am not only collaborating with my brother but also with other companies. We are forming strategic alliances to place charging stations in key locations like Mugling, Narayanghat and Birgunj. This way, we cover a wider area and avoid redundancy.

We share a lot of manpower and backend resources with my brother’s business which helps us reduce costs and stay competitive. Although our showrooms and sales teams are separate, we support each other whenever there is a need for manpower or other resources. This resource-sharing helps us remain competitive.

When I was selling about 1,300-1,400 vehicles, I had a larger team and more showrooms. However, since Ford India closed down three years ago, I have reduced my team size and number of showrooms. Fortunately, my brother’s company was growing at that time, so we transferred experienced people to his company instead of letting them go. This was a win-win situation for both of us.

What policies or tax-related issues you would want to see changed or amended to benefit the industry?

Currently, the government imposes high duties on internal combustion engine (ICE) vehicles while promoting electric vehicles (EVs) by charging lower duties, which is a positive step. The government should continue this policy. Although there was a 10% increase in EV duties this year, fortunately, the automobile industry has been able to absorb it, so it hasn’t been a major issue. Regarding petrol vehicles, we are already at maximum duty.

What I would like to see, however, is more support in terms of bank financing. Despite banks having excess funds, the current bank financing for vehicles is only 50% for ICE vehicles. This means that if you are buying a vehicle worth Rs 5 million, you must pay Rs 2.5 million in cash as a down payment, with only the remaining Rs 2.5 million being financed.

When I first started in the automobile business, banks would finance up to 90% of vehicle purchases, though not for everyone; only customers with good income were offered that high percentage. At this time, I believe the government should consider making both EV and ICE vehicle financing available up to 90%. Currently, EVs have an 80% financing limit, while petrol vehicles are at 50%. If financing is increased to 90% for eligible borrowers, it will not only support the automotive industry but also boost sales, ultimately increasing government revenue. Moreover, banks, which are currently sitting on large amounts of unutilised funds, would be able to put those funds to use.

Additionally, vehicle financing works differently from other forms of financing. For example, when a business takes a loan, such as Rs 50 million, that loan is typically utilised over a long period as the business imports products and sells them. But in the case of vehicle financing, whatever amount is financed – whether 90% or 80% - the customer makes monthly EMI payments, steadily reducing the loan portfolio. As thousands of customers pay off their loans each month, banks can continue financing new customers. Over four, five, or seven years, as the loan tenures end, new customers will take fresh loans, creating a revolving cycle. This is why Nepal Rastra Bank should carefully consider vehicle financing as a distinct and recurring form of credit, allowing for greater flexibility and support in this area.

I don’t see Nepal becoming a hub for exporting automotive products unless the government begins to support certain sectors that are high consumers of electricity. If we get special incentives and start promoting the production of components here, it might create opportunities. For instance, many companies in India require automobile parts and if Nepal provides benefits and promotes the manufacturing of these components, we could begin exporting to India. Over time, things could evolve but I don’t see significant progress unless major steps are taken. As of now, I don’t believe it is feasible.

Given the government’s push for electric vehicles, what steps could be taken to accelerate their adoption in Nepal?

The government is doing a commendable job in promoting electric vehicles (EVs), and this initiative should certainly continue. However, there are a few areas where improvements could be made to create a more favourable environment for EVs in Nepal. One such area is the battery life of commercial vehicles. When a driver purchases a vehicle, they typically use it for four or five years. By the time the battery is depleted, the driver may have exhausted their finances paying off the EMI and may not have sufficient savings to replace the battery. The government should consider introducing a loan scheme specifically for battery replacements. This would provide much-needed financial support to drivers at a critical time.

Another key area is infrastructure development, especially with regard to charging stations. While the government currently allows a 20% markup for charging services, meaning if I pay Rs 10 for electricity, I can charge Rs 12 – the extra 20% doesn’t cover the full cost of making it commercially viable. Currently, automobile companies are making this investment, so the charging stations are operational. However, if an individual were to start a charging station, it wouldn’t be a sustainable business model. There have been discussions to increase the allowable markup, which makes sense given that charging stations provide a service. For example, just as you would pay more for a beverage at a restaurant because of the added service, the same logic should apply to charging stations. Infrastructure such as staffing, billing and seating requires investment, and individuals should be able to charge a higher price to cover these costs.

As EV infrastructure develops, it will alleviate the ‘range anxiety’ that people feel about driving electric vehicles. Knowing that there are ample charging stations will ease this concern.

In addition, there are still some issues when it comes to the recycling and export of old batteries. Although there is already a rule in place for exporting used batteries, there are challenges. For instance, under warranty, companies provide replacement batteries but expect the old ones back. However, these companies do not want to pay for the old batteries as they have already provided replacements. Under Nepali law, I cannot send a battery back without invoicing it, but the company is unwilling to pay, leading to a conflict. These small issues will need to be addressed, but I am optimistic that in the long run, these matters will be resolved as everyone works toward improving various aspects of the EV ecosystem.

I believe change is essential and it is inevitable. Initially, I was in denial, convinced that petrol was the only viable option. I couldn’t imagine how electric vehicles could emerge so quickly but they did. Fortunately, we were able to secure some EV dealerships which is why my business is still running; otherwise, I would have had to close by now. Change keeps happening, and we must adapt to the situation as it evolves.

High import duties are a barrier to vehicle affordability in Nepal. What policy adjustments would you suggest to make vehicles more accessible to a larger portion of the population?

You can clearly see the impact of high taxes on petrol vehicles as they are subject to very high duties. As a result, there are now very few buyers for petrol vehicles. In comparison, if you look at neighbouring countries like India or China, vehicles are much cheaper, while here in Nepal, both electric vehicles and petrol vehicles are significantly more expensive, with petrol vehicles being especially costly.

If the government wants to make vehicles more affordable, they definitely need to reconsider this. I understand that reducing duties may not be feasible, but one suggestion would be to address the issue of older vehicles on Nepal’s roads – some of which are 20 to 25 years old. Many people continue to repair and use these vehicles, while others are no longer roadworthy. If the government provides an opportunity to scrap these old vehicles and replace them with new ones, it would not only allow for the import of more vehicles but also help people upgrade to newer models. This could create a market for both EVs and ICE vehicles through the replacement of older cars and bring in new buyers, which would benefit the country as well.

Additionally, economic improvement is essential for everything else to progress. The government needs to invest heavily in the development budget which will eventually lead to people having more disposable income to purchase cars. Right now, people simply don’t have the financial capacity to buy new vehicles because businesses are under significant stress. This is an issue that must be addressed for the industry to grow.

What are the primary challenges facing the automobile industry in areas of infrastructure, logistics and after-sales service?

For infrastructure, we currently pay a 10% tax on petrol vehicles and 5% on electric vehicles. I hope these funds are being utilised effectively. If the roads are well-maintained, vehicle breakdowns will decrease. Good roads enable quicker commutes, which results in fuel savings – whether for EV batteries or traditional petrol and diesel vehicles. This contributes to conserving national resources. When roads are in good condition, vehicles can move without frequent stops.

Currently, most of the EVs we import come via road from China. Approximately 80% of our EVs are sourced from China, and while the Tatopani route is in relatively better condition, it still requires improvement. The Kyirong route, however, is in poor shape. These roads need repair, especially as floods often disrupt the supply chain, making it difficult to receive vehicles. These issues must be addressed to ensure smoother operations.

I have primarily discussed automobiles, but the issue also extends to spare parts. There is significant infiltration of spare parts across the borders, with people bringing them in illegally. As a result, the government loses revenue and due to high duties, we are not competitive. The government needs to tighten border control, implementing checks and balances to prevent the smuggling of counterfeit or duty-unpaid products.

Automobile companies are now establishing assembly plants in Nepal. How do you view this trend? Do you think Nepal has the potential to become a hub for automobile assembly in the future?

There are two aspects to address here. First, how do I perceive this? And second, do I see Nepal becoming a hub? Currently, we have a significant presence of two-wheelers, with almost all major brands assembling in Nepal, which is a positive development. According to the government’s plan, there is a move towards localisation. If companies are able to localise as planned, it is a great initiative because it will lead to backward integration resulting in the establishment of many additional companies to supply or manufacture products for these assemblers. The same applies to cars. One company has already started but for them as well, backward integration will eventually be necessary after a few years.

Now, regarding whether Nepal can become a hub, the situation is different. Typically, countries that become hubs have a large domestic market. Nepal, however, does not have a substantial domestic market, and I don’t foresee this changing in the near future. I don’t see Nepal becoming a hub for exporting automotive products unless the government begins to support certain sectors that are high consumers of electricity. If we get special incentives and start promoting the production of components here, it might create opportunities. For instance, many companies in India require automobile parts and if Nepal provides benefits and promotes the manufacturing of these components, we could begin exporting to India. Over time, things could evolve but I don’t see significant progress unless major steps are taken. As of now, I don’t believe it is feasible.

What is your organisations long-term plans in terms of innovation, expansion and partnerships within the automobile industry?

I believe change is essential and it is inevitable. Initially, I was in denial, convinced that petrol was the only viable option. I couldn’t imagine how electric vehicles could emerge so quickly but they did. Fortunately, we were able to secure some EV dealerships which is why my business is still running; otherwise, I would have had to close by now. Change keeps happening, and we must adapt to the situation as it evolves.

We have expanded beyond just sales, service and parts, and now we are venturing into setting up charging stations, which is something entirely new. When selling petrol cars, I was never asked to set up a petrol station in a particular area like Manang or Jomsom to facilitate car sales. People managed on their own. But with EVs, we have to take care of things for our customers.

If I don’t adapt, I will fall behind in the race, while my competitors move forward. New challenges keep arising and we are embracing them. We continue to evolve, changing ourselves to meet the needs of Nepal and the national market. Whatever comes our way, we will keep moving forward.