Uganda reinstates tax on e-vehicles
Saturday June 29 2024
According to a report by the International Energy Agency, more than half of the electric cars on roads worldwide are found in China. The country was also responsible for 35 per cent of global EV exports in 2022. PHOTO | FILE | NMG
Uganda has reinstated a 25 percent import duty on fully electric vehicles, hybrid vehicles, and electric motorcycles.
“We were allowed to reinstate the import duty on fully built electric bikes, hybrid vehicles, and electric vehicles during the review of the East African Community (EAC) Common External Tariff in May 2024,” said Moses Kaggwa, director.
On paper, EAC partner States should be implementing the new EAC CET 2022 structure without any changes, but Mr Kaggwa notes that industrial development, a need for import substitution, and specific sector protection calls for periodic reviews.
Uganda has an ambitious plan of transitioning from traditional gasoline-powered electric to electric cars which produce zero tailpipe emissions. This explains why the government-owned car Kiira Motors Corporation is producing more electric buses to be deployed on urban roads and for the export market.
For the export market, Uganda has orders for electric and low diesel combustion buses from Tanzania, South Africa, Nigeria, and Eswatini, according to Finance Minister Matia Kasaija.
Since, Kiira Motors developed its first Kiira Electric Vehicle project in 2011 and Africa's first hybrid vehicle, the Kiira EVS, in 2014 and Africa's first solar electric bus, the Kayoola Solar Bus in 2016 a total of 39 buses have been manufactured in Uganda, of which 27 are electric and 12 are low-emission diesel combustion vehicles.
Read: Uganda banks on tax exemption incentive for the e-mobility drive
Currently, the biggest budget of Uganda’s bus maker is gulped by the massive investments in infrastructure development in Jinja, to support the planned manufacturing of 2500 buses yearly.
The first buses are expected to roll off the Kiira Vehicle Plant (KVP) located in the Jinja Industrial and Business Park in October 2024.
In the second phase, a production, body shop, chassis line, paint shop, quality inspection and testing, and building and test track will be constructed.
According to a report by the International Energy Agency, more than half of the electric cars on roads worldwide are found in China. The country was also responsible for 35 per cent of global EV exports in 2022.
Instead, Kampala has scaled down subsidies in electric small cars, by increasing import duty from nil in the previous financial year to 25 percent.
The measure has pushed up the cost of a Nissan Leaf at Motorcare Uganda by over Ush51 million ($13,750), from Ush204.3 million ($55,000) to Ush255.3 million ($68,750), the most affordable model in Kampala.
“Electric cars are already expensive,” said Benon Mascot, Deputy General Manager, Sales and Marketing, Motorcare Uganda Nissan, suggesting, he projects the e-vehicles sales which were starting to pick to drop.
When import duty was zero-rated, Uganda Revenue Authority (URA) car import data shows that electric car imports reached 420 units in the 2023-2024 financial year, a stark contrast from 26 previously when the tax man was collecting the duty.
The data shows 403 vehicles are hybrid while 17 are fully electric, this also sends signals that subsidies work, and they managed to sway away some Ugandans from driving purely gas-powered cars to hybrids and electric.
The unpredictable tax regime in the country makes planning hard, according to car dealers, who warn that the measure is set to scare away investors.
“You cannot promote the production of a product where the investor is going to invest and then again, educate and sensitise the market, create awareness, create infrastructure, because there are not many people participating in that field.”