Uganda is making a strategic pivot to leapfrog the 139-year-old internal combustion engine and establish itself as a global player in the new electric vehicle (EV) market, backed by a powerful suite of fiscal incentives, including a 10-year income tax holiday.
Speaking during NBS TV's SpotlightUG, a high-level media dialogue series that brings together key ministries, departments, and agencies to highlight achievements and future priorities, Mr. Allan Muhumuza, Team Lead of the Mobility Bureau at the Science, Technology, and Innovation (STI) Secretariat, detailed how Uganda plans to turn a massive economic drain into a primary pillar of its knowledge-based economy.
"Mobility is the world's largest sector, estimated at about 15 trillion dollars. The transition to e-mobility is a very unique and key opportunity for us to step in and put our foot in the door. With the electric vehicle, everyone is on the same level; it's new technology," Mr. Muhumuza began.
The $4.7 Billion Problem
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Mr. Muhumuza framed the challenge in stark economic and environmental terms. Uganda currently operates as a predominant consumer, importing vehicles worth $860 million annually, and if nothing changes, that could reach up to $4.7 billion by 2040, he warned.
This drains foreign reserves and floods the country with end-of-life vehicles. Taxis on Ugandan roads, he noted, have an average age of 25 years, while passenger vehicles average 12 years. This directly contributes to Kampala being one of the top five most polluted cities in Africa and creates massive energy inefficiency, with Ugandan vehicles consuming 2.5 times more fuel than they should.
A New National Strategy
To counter this, the government published the National E-Mobility Strategy in 2023, with the overall goal to position Uganda as a net source, rather than a consumer, of e-mobility solutions in the region.
The strategy's top priorities are:
1. Local Manufacturing: Targeting a combined production capacity of half a million vehicles by 2030, with 65% local content.
2. Localize the Battery: Domesticating the massive and capital intensive battery value chain.
3. Electrify Public Transport: Focusing on electric buses, motorcycles, and light rail.
To make this a reality, the government has introduced powerful incentives. Mr. Muhumuza confirmed a 10-year income tax holiday for manufacturers of electric vehicles and batteries, a VAT exemption on locally manufactured EVs and charging services, and exemptions on excise and stamp duty.
Crucially, parts and materials for local manufacturing are zero-rated, while importing a fully built vehicle incurs a 25% import duty. "We have put those mechanisms in place so that we can drive industrialization," he stated.
Beyond the 'White Elephant'
Addressing long-held public skepticism that Ugandan car manufacturing is a "white elephant," Mr. Muhumuza explained that the Kiira Motors plant in Jinja is just a catalyst for an entire "industry of industries."
"Only about 15% of the value of that vehicle lies in that production plant," he said. "85% has to come from parts manufacturers, research and development, that's where the real value is."
He highlighted that a private-sector ecosystem is already forming, including a truck assembly plant on Masaka Road, NEC's armored vehicle production, and four different companies manufacturing electric motorcycles.
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The Mobility Bureau's job, he explained, is to nurture existing SMEs, those already making brake pads, filters, wipers and tires for the lucrative after-sales market--and help them meet the more stringent quality standards required to supply a manufacturing plant, where reputation is on the line.
This includes government de-risking key areas like the estimated $2 billion battery value chain, a venture a typical private sector might not find interest in until a demonstrator proves its viability.
This week's Spotlight UG had STI (Science, Technology and Innovation) Secretariat with the discussions centered on: Innovating for Impact: Building Uganda's new economy through science, technology and innovation. Looking into the strides that we are making in the science, technology and innovation sectors, which is one of the sectors Uganda is using to leap into the upper middle income status as we look at Vision 2040 and the tenfold growth strategy.
