The government of Rwanda in 2021 introduced a host of incentives that not only target the manufacture and import, but also the acquisition of electric vehicles (EVs).
EVs benefit from reduced electricity tariffs, they are treated as value added tax (VAT) zero-rated products alongside their spare parts, batteries and charging station equipment.
The government also exempts EVs from import and excise duties, as well as 5 per cent of withholding tax at customs. This is in addition to rent-free land for charging stations, and free authorisation for commercials EVs.
On the manufacturing and assembly level, firms in this line of business get 15 per cent corporate income tax and tax holiday.
These incentives were expected to attract investors who want to invest in EV production but also those who want to invest in import businesses.
Rwanda has seen gradual adoption of electric and hybrid cars. It’s easier to spot an EV or hybrid vehicle at almost every street of Kigali.
The incentives have potential to allow EV automakers to produce at a lower cost as well as EV importers to incur a lower cost of business. In turn, this incentivises car consumers to acquire them at affordable rates.
The case of EV adoption should be clearly understood. Fuel-powered cars emit the most pollution. According to the Rwanda Environment Management Authority, road transport contributes to 13 per cent of the country's greenhouse gas emissions.
By 2030, Rwanda is aiming to have 20 per cent of buses, 30 per cent of motorcycles and 8 per cent of cars electrified. To achieve these targets, it makes sense for the country to incentivise producers and consumers.
As government extends these incentives for the 2024/2025 fiscal year, we should ensure that their impact truly translate into increased adoption.
This should particularly mean finding ways to encourage automakers to assemble or produce EVs from Rwanda. Germany’s Volkswagen attempted to assemble its e-Golf cars from the country, but it has struggled to scale, thereby abandoning those plans.
Chinese EV maker BYD has hinted on plans to enter the local market. However, leaders should get to task and give these automakers every possible reason to produce or assemble their cars domestically.