Once the assembly industry takes root, it opens avenues for the establishment of various vendors and facilitates local value addition.

In most countries, the automobile industry begins with the establishment of an assembly industry. Even in India, when Maruti started, it initially operated solely as an assembly plant. Once the assembly industry takes root, it opens avenues for the establishment of various vendors and facilitates local value addition. This way, the assembly industry forms the foundation of the automotive ecosystem.

In Nepal, it was envisioned that after the establishment of the assembly industry, numerous supporting industries would emerge, contributing to cost reduction and local value addition. Without a self-sufficient assembly industry, supporting industries within a country would struggle to thrive. The assembly industry kick-starts the ecosystem by generating demand for support industries. Without assembly plants, these supporting industries struggle to find a market for their products. Even in the absence of a fully developed support industry, assembly alone contributes a notable 15-20% to local value addition and facilitates skilled manpower development.

Significant investments have been made in the assembly industry, with each sector employing over 100 engineers. The government offered incentives in the form of excise duty exemptions only. Such exemptions were initially 25 percent and later increased to 50 percent. This incentivized automobile distributors to establish assembly plants in Nepal.

When we launched the Bajaj assembly plant, the overall automobile market was expanding, and there was an expectation that other supportive industries would follow suit. Before setting up the assembly plant, agreements had already been secured with seven such supportive companies. However, despite initial optimism and plans to attract supporting industries, the country faced a severe economic downturn which stalled the expected growth of the ecosystem. Supporting industries such as seat, metal pressing, plastic moulding and wire harnessing could have flourished had there not been an economic slowdown.

Everyone is in a 'wait and watch' mode at present because of the economic downturn. Once the economic situation improves, the partners in talks are expected to invest. Ongoing communication with potential partners indicates their readiness to invest once the country's economy bounces back. The decline in market size from 500,000 to 100,000 understandably sent shockwaves through the industry, but there's still potential for local value addition.

Our assembly plant employs approximately 140-150 engineers. When operating at full capacity, it could easily have a workforce of around 300 semi-skilled and skilled personnel.

With the proliferation of assembly plants, a single-seat manufacturing industry or metal pressing industry can serve the requirements of numerous two-wheeler assembly plants. Although short-term benefits may appear uncertain, adopting a long-term perspective presents the potential for substantial growth. Supportive industries such as tire and battery factories, lubricant producers, and plastic moulders are already in operation, albeit at reduced capacities. With appropriate government policies backing local manufacturing, the future holds promise. Hence, continuation of incentives for assembly plants could lead to a more vibrant automotive industry landscape in Nepal.

Our assembling plant employs approximately 140-150 engineers. When operating at full capacity, it could easily have a workforce of around 300 semi-skilled and skilled personnel. The investment of around Rs 1.5 billion reflects our commitment to this vision. We have the capacity to assemble 100,000 two-wheelers annually, working one and a half-shifts. However, we are currently assembling only around 25,000-30,000 due to lower demand in the market. Despite this, we assemble the entire range of Bajaj two-wheeler models available in the Nepali market.

The automobile assembly industry presents a significant opportunity for employment in Nepal, akin to the construction sector. Just as the construction of a house stimulates various industries, the automotive sector provides support to local motor workshops and ancillary industries. While short-term revenue considerations may suggest otherwise, investing in this sector is essential for long-term economic growth.

The current pricing structure reflects the competitive advantage that we have gained, with a significant portion of the benefits passed on to consumers. Given the downturn in the domestic automobile market, there is intense competition among the automobile distributors for market share. Consumers have benefitted optimally due to the assembling of two-wheelers in the country. If the assembly industry is removed, it would lead to an immediate price increase of 10-15% on motorcycles. 

(Golchha is the immediate past president of FNCCI)