CG in troubled waters for profit margin on electric motors « Khabarhub

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KATHMANDU: Nepal’s five-party coalition government presented its budget for the financial year 2022/23 a few weeks ago.

Although some see it as a populist budget aimed at the upcoming election, critics believe it is unfair as some groups benefit while others feel unfairly treated.

Let’s explore some of the areas where the budget went wrong and was unfair to people in this context.

Contradictory provision for the sanitary napkin

The 2022/23 government budget announced the exemption of sanitary napkins from the payment of 90% customs duties. Manufacturers of sanitary napkins have widely criticized the government’s decision to exempt sanitary napkins from paying 90% customs duties.

In its annual budget for the financial year 2022/23, the government announced a 90% exemption from customs duties on the import of sanitary napkins.

The government is currently imposing a 15% tariff on all imports of sanitary napkins, which will be reduced to 1.5% after the start of the next fiscal year.

Another reason for the high price is that the company provides a free 60W charger, which costs around NPR 1 lakh, along with a one-year insurance. All of this will cost you just over 150,000 NPR.

Although the exemption would facilitate the acquisition of sanitary napkins by women of all origins in the country, the domestic business will be handicapped by this unfair arrangement.

Since local manufacturers would not be able to compete with foreign products, the government’s decision could lead to the collapse of Nepal’s sanitary napkin industry.

As the budget states “to support domestic producers”, the government announced in the annual budget that only a 1% tax will be paid on the import of raw materials needed to manufacture towels.

However, it should be pointed out that the announcement of a 1% reduction in customs duties on raw materials is insufficient because the 54 raw materials and packaging needed to manufacture the stamps have not been reduced.

In light of this, we could conclude that the new budget has been unfair to local sanitary napkin manufacturers.

In Nepal, there are 35-40 small and large sanitary napkin industries. With an investment of Rs 6 billion, around 900 million sanitary napkins will be produced.

The government’s choice unfairly favors foreign manufacturers. The government’s decision to collect only 1.5% customs duty on imported tampons has pushed local industries to the brink of closure.

According to the Nepal Sanitary Napkin Manufacturers Association, 6,000 jobs are at risk and simultaneously existing industries could face bankruptcy.

CG exceeding 20% ​​profit margin

The government agreed to levy a 30% excise tax on automobiles with engines rated between 100 and 200 kW in the 2022/23 budget.

Electric vehicles with 201-300 kW motors will be subject to a 45% excise tax imposed by the government. Excise duty on electric vehicles with engine power over 300 kW remained at 60%.

Chaudhary Group (CG) has taken advantage of the government arrangement by launching its electric motor segment, the Neta V, which shares a 55 KW electric motor. Since its inception, CG has been in the spotlight as citizens have protested its high profit margin.

CG Motors, a subsidiary of the Chaudhary Group, launched its first electric crossover vehicle, the Neta V, in the Nepalese market on Wednesday (June 8).

The revolutionary Neta V is priced at Rs 38 lakhs, according to the company. Surprised by the prices, Nepalese citizens began to study the automobile and discovered the significant price difference in the Chinese market.

The Neta V EV costs only Rs. 15 lakhs in the Chinese market. This message began circulating in the media, accusing CG Motors of defrauding customers.

Nepal has a few electric vehicles on the market, but this is the first time one of them has caused controversy. The following calculation and facts show how the controversy arose.

NETA V EV Market Price Calculation

Price in China: NPR 15,000,000 (at current dollar exchange rate)

Customs duties: 30% of 15,00,000 = NPR 4,50,000

Transport cost (each vehicle) = NPR 80,000

Company’s total cost price before profit = Price in China + Customs duty + Transportation cost =

NPR 20,30,000

Maximum Distributor Profit (20%) = 20% of 20,30,000 = NPR 4,06,000

Market selling price = NPR 20,30,000 + NPR 4,06,000 = NPR 24,36,000

According to this calculation, the actual market price of the NETA V EV should have been Rs. 24 lakhs, while the price of the vehicle is Rs. 38 lakhs, indicating a Rs. 15 million difference.

Let’s do the same calculation with Hyundai Kona EV, which is in the Nepalese market.

Hyundai Kona price calculation

Price in India: INR 23.79,000 = NPR. 38,06,400

Customs duties: 30% of 38 06 400 = NPR 11 41 920

Transport cost (each vehicle) = NPR 80,000

Total cost price for the company before profit = Price in India + Customs duty + Transport cost = NPR 50,28,320

Maximum profit for distributor (20%) = 20% of 50,28,320 = NPR 10,05,664

Market selling price = NPR 50,28,320 + NPR 10,05,664 = NPR 60,33,984

It’s clear how unethically priced the Neta Ev was since Kona’s calculated preliminary price and its sale price in Nepal are nearly identical.

Following widespread criticism, the Chaudhary Group released a statement explaining why the prices are so expensive.

According to CG, the Chinese government provided a subsidy of up to $6,000, which the Nepalese market could not obtain, resulting in higher prices.

Recently, Finance Minister Janardan Sharma came under fire for allegedly letting an unauthorized person into the finance ministry the day before the budget was released. Are these budgetary injustices the result of the recent event? An explanation of the matter is certainly necessary.

This justification, however, does not seem reliable, given that Alibaba express, a global e-commerce platform based in China, sells the same model with all the government incentives.

Similarly, CG argues that changing a left-hand drive car to a right-hand drive car will cost a lot of money. This justification is as insane as it sounds. When you order a large number of vehicles, the manufacturer customizes them for free. When controlling thousands of vehicles, changing the steering control shouldn’t be an expensive task.

Another reason for the high price is that the company provides a free 60W charger, which costs around NPR 1 lakh, along with a one-year insurance. All of this will cost you just over 150,000 NPR.

Despite the fact that the conflict has lasted for more than a week, the government has done nothing to remedy it. The government seems to be in cahoots with CG Motors, which is not in the interest of the general public.

Nonetheless, Nepali citizens are not easily fooled, and if the prices don’t change soon, the Neta V EV could be a failure before it goes up.

Recently, Finance Minister Janardan Sharma came under fire for allegedly letting an unauthorized person into the finance ministry the day before the budget was released. Are these budgetary injustices the result of the recent event? An explanation of the matter is certainly necessary.

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