Hulas Motors’ 10 years
Sherpa's Drive to Mustang
Nepal 's indigenous vehicle manufacturing business has completed 10 years. Hulas Agro Engineering, a thresher manufacturing company that also imported and marketed water pumps, was renamed Hulas Motors and till now it has already sold about 500 units of vehicles.
The story of how the idea originated and was implemented into making more refined utility vehicle is interesting.
According to Surendra Golchha, Managing Director of the Biratnagar-based Hulas Motors and the Director of Golchha Organisation, the idea originated when the staff of Hulas Agro were discussing how to overcome the high price burden of the water pumps that the company was selling. One pump engine then would cost about Rs. 30,000, a hefty sum for the average Nepali farmer. One idea that came up during the discussion was to find ways to make the engine fulfil a couple of other purposes as well. "So we decided to put this engine on a cheap chassis and make it capable to do threshing, running pumps and carrying people and goods to and from the farm and around the village. Luckily I found a person from India who accepted to make such a machine for the cost of Rs. 40,000," recalls Golchha.
After the vehicle was made ready in Patna , it was brought to Nepal with much hassle in the customs as it did not fall under any category of the customs code. The power supply was with the fan-belt and all the components were second or third hand. "It had no roof, no headlight, nothing", says Golchha. Experimenting and improvising it, the company sold 2-3 such vehicles with the same technology that the Indian mechanic had used. The price was Rs. 80,000. But the performance was not good and the company was not in a position to give any warranty. So, plenty of complaints were received. Then there were further improvements made by using first hand components and the price was hiked to Rs. 200,000 and Rs. 250,000. Still it was not ok as Mahindra pick ups then were available for Rs. 600,000 or Rs. 700,000 in case of new and Rs. 300,000 or Rs. 400,000 in case of second hand.
Then came the new body though the engine and chassis were the same. "But when I test drove the vehicle, I noticed that the vehicle's performance was not matching with its looks. So we decided to change the engine and chassis as well," he recalls.
However, the vehicle was placed in the Auto Exhibition in Kathmandu by hauling it all the way from Biratnagar on a truck. Though it was a hard time to get it climb the incline from Tinkune of Kathmandu to the International Conference Centre at Baneswor, the visitors admired it and one of them suggested the name "Sherpa" (the mountain porter) instead of "power cart" (the name it was given earlier as it was originally conceived to replace the bullock carts in the village). The first Sherpa was, however, produced only after one year. Then came the 20D model (for 20 HP diesel engine), of which 3-4 units were sold. It was followed by 32D (about 50 units sold) and by 46D (about 35 units sold). The added features in 46D made it useful also in the hills.
Meanwhile, the Nepal Vehicle Emission Standard was promulgated by the government and the company had to change the product drastically. The result was 46NES (representing Nepal Emission Standard). Then the E-Drive with new engine and the 'e' on the name representing economy, easy driving etc. was introduced. It sold about 130 units. Then alas, the government imposed a 32 per cent excise on vehicles, thus bringing the Nepal-made vehicles under the excise net. Golchha says, though his product was selling well during that time, the excise made it costly. As the imported vehicles were subject to 110 per cent duty, the company still enjoyed a protection because all the duties and excise on its product added up to only about 60 per cent, Golchha says this is not enough protection as the company as well as the brand is new. Then came Mustang and Mini-V - the latter being a Maruti Van size vehicle with option for petrol and gas engine. According to him, the company is selling about 70-80 units of Sherpa, Mustang and Mini-V together and for the fiscal year 2006-07 the target is to reach 200 units. However, Mini-V is not being improved because of the problem of duty.
Customer Focus
The company is focusing on the commercial use of its vehicles, not for personal use, thus pitting them against major brands such as Mahindra of India. Now the company is marketing Mustang also as a commercial vehicle for the urban areas. According to Golchha, about 10 to 20 per cent of the customers decide to buy his products due to patriotism. "Being cheaper and better suited for some hill terrain when compared with the competition are the prime motivators for the buyers. But patriotism too figures in the calculation, I think," he says.
But that level of patriotism is not there in the case of government, complains Golchha. "The officers want luxurious cars and the drivers too want to drive luxurious cars. Even in such a situation, we have been able to sell so many vehicles. For that I must thank my customers who encouraged us," he says.
So, what are the plans of the company now? "Making newer models that are more efficient," says the indefatigable Golchha.
Banking on Foreign Employment
Even while it is being said that the number of banks and finance institutions in Nepal has crowded the market, the Nepal Rastra Bank is granting license to new players. The good news, however, is that the new players are coming up with new visions and ideas.
The latest new entrant into the market is Nepal Development and Employment Promotion Ltd., a Category B financial institution with Rs. 192 million paid up capital. And as the name suggests, it is going to be dedicated for the promotion of employment - both within and outside Nepal .
In fact NDEP was originally conceived by the promoters as a joint venture with the association of manpower agencies that send Nepalis for foreign employment. However, that could not materialise as the association of the manpower agencies broke up due to wrangling among themselves. Therefore, the promoters approached the Employee Provident Fund offering 15 per cent shares which the fund management readily picked up. Despite that, the promoters are planning to induct selected manpower agencies as shareholders in the company in the near future, according to the company's Chairman and Chief Executive Officer Lok Bahadur Shrestha, a veteran bureaucrat and also former Finance Secretary and Chief Secretary of the Nepali government and former Nepali ambassador to Bangladesh . Meanwhile he was also the Chairman of the Board of Directors of various banks including the state-owned Rastriya Banijya Bank and Nepal Bank Ltd. as well as private sector Nabil Bank and Nepal Indosuez Bank (now Nepal Investment Bank).
The other major names in about five dozen promoters of NDEP include Ganesh Bhakta Saakha (Chairman of Saakha Group), Min Bahadur Gurung (owner of Bhatbhateni Supermarket) and Subarna Bajracharya (Associate Professor of Financial Management).
Being conceived as an employment promotion bank, the focus of NDEP will be to provide loans to those who have to finance their trip to the country where they have found work. "I have seen many villagers coming to Kathmandu with some money by selling off their land or houses and by the time they get selected for foreign employment and get their visa, they are left without money and they can't buy their ticket. That has ruined many families. We want to help to avoid such disasters," says Shrestha.
"In fact, the foreign employment business is such that all the risks are borne by the poor villagers who go abroad and toil in an alien environment while all the others including the manpower agencies, the remittance companies and the banks that take the lion's share of benefit from foreign employment bear little or no risk. NDEP will try to develop a business of protecting these workers," he adds.
To provide such loans for foreign employment, NDEP has developed a system of taking a collateral or a guarantee from the manpower agency. "Unfortunately, we can't help those who can't offer collateral. For this type of people, a guarantee from the manpower agency would be helpful. As the agencies know the employers well, they can arrange to have the amount deducted from the worker's salary and send it here on an installment basis to repay the loan," says Shrestha. This is likely to be accepted by agencies as one manpower agency has already deposited an amount as a standing guarantee against which NDEP would be extending loan to those recommended by the agency.
Also being considered is a proposal to tie up with manpower agencies and set up joint offices at all the major centres abroad where Nepalis are working. These offices can work with the employers and provide a number of services to the workers. Thus these can be made separate entities with the costs and profits shared between the NDEP and the manpower agencies.
For other types of financing, NDEP has offered schemes under the home loan, vehicle loan, education loan, festival loan and all purpose loans targeting middle-class people. For collecting deposits, it has put forward a number of schemes including basic saving (minimum balance Rs. 500 but maximum only up to Rs. 100,000), saving multiplier, fixed plus and recurring deposits. "We also want to provide an ATM facility to those who wish to use ATM but have no access to it as this facility is still limited to only those who can maintain a handsome deposit. Our basic saving account is designed specifically for those people, hence the cap on maximum deposit," Shrestha explains.
Perhaps an equally important plan NDEP has is to introduce lease financing. Though this type of financing is still not picking up in Nepal in the absence of a proper law, an improved draft prepared with the support from the Asian Development Bank is expected to be introduced as a law very soon. Meanwhile, Shrestha himself is planning to visit Mumbai to study how HDFC, a finance institution there, is doing excellent job in lease financing.
Similarly, Shrestha is pinning hope also on the venture capital fund that Asian Development Bank is providing to the Ministry of Industry. "Management of that fund is being entrusted to NDEP," he confides.
