Rwanda Unveils New Incentives to Drive Electric Vehicle Uptake

A cabinet meeting held on Wednesday, April 15 approved a strategy for electric mobility adaptation aiming at increasing electric vehicles and motorcycles.

Among the key components of the strategy are a number of incentives that will apply to electric vehicles, plug-in hybrid electric vehicles and hybrid electric vehicles.

According to officials, the incentives are aimed at attracting investments in the new and upcoming industry.

With an annual vehicle growth rate of 12 per cent in Rwanda, the incentives are aimed at lowering the bar for electric vehicles and motorcycles uptake taking into consideration the popularity of fuel-powered engines.

The incentives cover key pain points in the process of electric vehicle rollout including cost of energy, taxes, infrastructure among others.

The main aim is to make owning and maintaining an electric car less costly in comparison to a fuel-powered vehicle.

Reduced energy costs

With charging stations expected to serve the roles currently served by gas stations, the incentives among other things seek to reduce the cost of energy powering the vehicles.

Electricity tariffs for charging stations will be priced at the industrial tariff level; large industry category. With that, electricity tariffs will be at around Rwf94 per kilowatt-hour which is significantly lower than residential consumption.

Energy costs for electric vehicle owners will further be brought down as they will benefit from reduced tariff during off peak hours from 11p.m to 8a.m.

Tax incentives

In an effort to reduce the cost of ownership and maintenance of electric vehicles, the strategy approved by cabinet exempted import and excise duties on electric vehicles, spare parts, batteries and charging station equipment.

The incentives also zero-rated Value Added Tax for electric vehicles, spare parts, batteries and charging station equipment.

Ordinarily, vehicle imports have to settle a bill of 25 per cent import duty, 18 per cent VAT, five per cent to 15 per cent excise duty, depending on the size of the engine.

These taxes and levies drive up the cost of shipping a car into the country, where and often being more than the purchase price of the vehicle from the source market.

The withholding tax of 5 per cent of spare parts, batteries and other equipment will also be exempted.

Infrastructure

Electric vehicles' adoption process in the country will also be facilitated by rent-free land for charging stations for land owned by the government further reducing the cost of set up and maintenance.

The building code and city planning rules will also include provisions for electric vehicle charging stations. This is expected to reduce the complexity of the process for interested parties.

Investor incentives

To increase chances of Rwanda being a producer for electric vehicles, batteries and other inputs, the government has rolled out incentives in the investment code such as 15 per cent Corporate Income Tax (CIT) and tax holiday for companies manufacturing and assembling electric vehicles.

This could come in handy for operators such as Volkswagen Rwanda and Ampersand who are already introducing electric vehicles to the local market.

Business preference

Commercial electric vehicles will also have ease of market entry as the new list of incentives provides for free license and authorisation for commercial electric vehicles.

The government will also de-risk the business by guaranteeing market, where preference will be given to electric vehicles for government-hired fleet.

Already, there are electric vehicles and motorcycles in the local market as well as charging stations.

The incentives could also play a role to mobilize investment into the e-mobility sector which has fast emerged as a top sector on demand. Last week, Ampersand, a local firm involved in electric motorcycles, successfully raised $3.5M in their Series A funding which will go into increasing their fleet size and charging stations. The firm said that with $75m investment, all motorcycles in the country could be electric.

Volkswagen Mobility Solutions Rwanda in March unveiled a new charging station, thanks to a partnership between the company, Siemens and Radisson Blu Hotel.

The incentives are also expected to serve Rwanda's long-term goal to be a carbon-neutral nation as articulated in its Vision 2050.

In the short term, Rwanda aims to reduce emissions by 38 per cent by 2030 with electric vehicles are estimated to represent 9 per cent of potential energy-related emissions mitigated under the country's ten-year climate action plan.

Welcome development

Speaking to The New Times, Josh Whale, the CEO of Ampersand, an e-mobility firm operating in Rwanda, said that the incentives will go a long way in ensuring more electric vehicles on Rwandan roads.

Ampersand is an electric motorbike company that has successfully rolled out electric-powered motorbikes with battery swap stations.

He specifically welcomed the subsidy of electricity tariff, saying that this was their "number one pain point and we're very excited about this development."

Whale added that: "Before coming up with the incentives, the ministry of infrastructure consulted thoroughly and identified which polices would make the most difference to the market, and these incentives are very well targeted."

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