There was a time when the contribution of industries to the GDP of the country was at 12 per cent. However, in recent years, the industrial sector has taken a slump, reducing its contribution to the GDP to six per cent.
The industrial sector has long borne the brunt of the political instability in the country, making it unfavourable even for well-off industries to sustain. Sensing this deadlock, industrialists are venturing to new businesses, especially auto dealership.
More and more business houses are taking up auto dealership as a viable business to counter the loss incurred from industries. Almost all renowned business houses have added auto dealership in their portfolios. A few business houses have even taken up the dealership of 3-4 brands.
There are nearly two dozen business houses, which import and sell vehicles and spare parts. They include established business houses like Chaudhary Group, Golchha Organisation, Agni Incorporated, Laxmi Group, Vishal Group, Shanker Group and Jyoti Group. While new entrants like IMS Group are soon entering the auto business.
In total, these dealerships imported vehicles and spare parts worth a whopping Rs 50 billion in the last fiscal.
The auto sector has a relatively lower risk factor compared to other businesses. It also has a higher profit ratio, which makes it a viable business. Moreover, the auto brands also provide the dealership with high commission rates and advertising budgets, which make auto dealership an extremely profitable venture.
The market price of vehicles sold in Nepal start from Rs 1.5 lakhs for a basic two-wheeler and can shoot up to nearly Rs 50 million for a luxury four-wheeler. In total, these dealerships imported vehicles and spare parts worth a whopping Rs 50 billion in the last fiscal.
“After petroleum products and steel, automobiles are the most imported commodity in Nepal,” says Sahil Agrawal, managing director of Shanker Group. “The large volume of the business attracts many business houses to this sector. Moreover, this sector has been increasing by nearly Rs 9-10 billion every year.”
“Overall, there is more profit in businesses than industries,” says Roop Jyoti, vice-president of Jyoti Group. “If we hadn’t entered into business, it would’ve been difficult for us to sustain our manufacturing industries. The profit earned from businesses is keeping our industries afloat.”
However, not all businesses make profit.
“Those who are ahead in the competition are the ones who earn profit,” says Agrawal. “Out of the nearly 30 dealers in the market, only the top five make profit.”
The auto sector has a relatively lower risk factor compared to other businesses. It also has a higher profit ratio, which makes it a viable business.
With a gloomy industrial climate persisting in the country for long, business houses have no other option but to venture into the auto sector even though the competition is cutthroat.
“There is no security to run our industries smoothly,” says director of Laxmi Group Anjan Shrestha. “It is not easy to run an industry in Nepal due to the lack of a clear policy and support from the government.” Huge capital is required to set up industries and return on investment takes a long time. Moreover, other factors like political instability, labour issues and strikes are making it impossible for industries to find their footing.
“With no sign of relief from the political deadlock, we have no choice other than to venture into businesses,” says Shrestha. Moreover, Nepal’s industries are not doing well as they have to compete with Indian products.
“It is not that we have completely shifted our focus to the auto sector,” says Agrawal, MD of Shanker Group. “The auto sector happened to be the most viable source of profit in the face of the decline in our industries.”
