Sales of passenger cars inexplicably jumped 109 percent last year even though the country’s growth rate plunged to a 14-yearlow. The bonanza is even more astounding because vehicle imports had come to a halt for four and a half months due to a trade embargo by India.

More surprises are in store. The automobile sector is the only segment of the economy in a least developed country like Nepal that has been posting consistent growth over the past decade.

Except in the fiscal years 2010-11 and 2011-12 when the realty bubble burst resulting in a setback to almost all sectors, the automobile sector has been on an upward swing.

A close look at the car/jeep/van segment shows how strong the growth has been. A total of 28,361 vehicles under this segment were registered in the fiscal year 2015-16, a whopping 109 percent growth from the 13,560 units registered in 2014-15. Such growth trends in the car market despite natural disasters like earthquakes and unrest in the southern plains indicate that the car market has matured in Nepal. These days, having a car is a necessity rather than a luxury.

Naturally, auto dealers are all smiles. “Demand for private cars has been growing like never before,” said Akash Golchha, executive director of GO Automobiles, the authorised distributor of Ford vehicles in Nepal. “Although we don’t have low-cost vehicles, the market is accepting our offers.”

Increasing purchasing power, easy financing from banks and financial institutions, growth in the inflow of remittance and a rise in the number of people earning middle-class incomes are among the major factors helping the auto market to swell.

“Bank interest rates on auto loans have gone down to as low as 6 percent from 12 percent in the past,” said Sachin Aryal, general manager of Dugar Brothers and Sons, the sole distributer of Nissan vehicles. 

Another factor contributing to the rise of automobiles is the unavailability of abundant public transportation services. Be it in the country’s capital Kathmandu or remote villages, public transportation is poor.

While people in Kathmandu are compelled to buy a vehicle for commuting due to the hassle of travelling on public transportation, the unavailability and inconsistency of public vehicles in remote Nepal forces people to arrange their own transportation.

The growth in the automobile sector has increased competition among domestic automobile dealers. Despite being a relatively small market, Nepal boasts the presence of almost all the major automobile brands. The size of the market has been increasing rapidly. With the increment in the market size, competition too has surged compelling auto sellers to offer more facilities and services to their customers.

According to automobile dealers, B segment cars popularly known as hatchbacks are most popular in the Nepali market and their sales are growing rapidly. “Generally, first-time car buyers who are upgrading from a motorbike are the main customers in this segment,” said Rajan Babu Shrestha, CEO of Sipradi Trading, the exclusive distributor of Tata Motors in Nepal.

“The country’s narrow roads, ease of parking and lower prices compared to other models are the major reasons behind the growing popularity of hatchbacks in Nepal. We offer the Horizonext and the Tata Bolt under the segment, and both brands are doing pretty well in this segment,” Shrestha added.

Hatchbacks are the most happening segment in the car market, according to automobile dealers. “They account for around 60 percent of our total sales,” said Anjan Shrestha, managing director of Laxmi InterContinental, the authorized distributor of Hyundai Motors, Korea. 

Apart from hatchbacks, sales of crossovers and sports utility vehicles (SUV) have also been picking up lately. According to Shrestha, sales in this segment account for around 31 percent of his company’s total sales. “Customer response to the Hyundai Creta has been amazing,” Shrestha added. Similarly, the Ford Eco-Sport under the same category is also doing wonders in the Nepali market.

Customer attraction towards SUVs and crossovers has increased lately due to safety and security issues, according to automobile dealers. “Road conditions in Nepal are not very good,” said Aryal. “So people prefer SUVs and crossovers to hatchbacks. We have witnessed a 50 percent growth in sales in the last fiscal year.”

The availability of low-priced SUVs and crossovers in recent years is another reason behind the increase in customer attraction. “Our SUVs and cross overs cost between Rs2.7 and Rs7 million,” said Bardhan Basnet, senior general manager of Agni Incorporated, the sole distributer of Mahindra in Nepal.

According to Basnet, a large number INGOs and NGOs engaged in relief work are the major customers of Mahindra. “Last year, we posted a growth of around 45 percent in the crossover and SUV segments.”