Uganda Hikes Import Duties on Electric Vehicles to 25%

Summary:

• Uganda has increased import duties on electric vehicles from 0% to 25%, citing a significant rise in imports. Car dealers express concerns over the impact on sales and investment. The government aims to promote local production of eco-friendly vehicles, with incentives for companies employing Ugandans and using local materials.

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KAMPALA, (Examiner) – Uganda has increased import duties on electric vehicles (EVs) to 25%, up from 0% in the previous fiscal year. This move responds to a surge in EV imports, which jumped from 26 units in the 2022/2023 fiscal year to 420 units in the following year, according to Uganda Revenue Authority data.

The sudden increase in import duties has drawn criticism from car dealers, who argue that the unpredictable tax environment hampers business planning and could deter investors. Benon Mascot, Deputy General Manager of Sales and Marketing at Motorcare Uganda Nissan, expressed concern that the price hike would dampen the growing interest in electric vehicles. “Electric cars are already expensive,” Mascot noted, predicting a decline in sales due to the increased import costs.

The price of a Nissan Leaf at Motorcare Uganda has risen by over 25%, from USh204.3 million ($55,000) to USh255.3 million ($68,750), making it the most affordable model in Kampala yet significantly more expensive than before.

The Ugandan government justified the tariff reinstatement as a strategy to reduce EV imports and promote local production of eco-friendly vehicles. Moses Kaggwa, Director of Economic Affairs, emphasized the need for import substitution and sector-specific protection through periodic reviews.

In line with this policy, the government-owned Kiira Motors Corporation is ramping up the production of electric buses for urban use and export, aiming to transition from gasoline-powered to zero-emission vehicles.

Further incentivizing local production, Parliament Speaker Anita Among announced that companies manufacturing electric vehicles, batteries, or charging equipment employing at least 80% Ugandans will be exempt from Stamp Duty Tax in the 2024-2025 financial year. This exemption, part of the Stamp Duty (Amendment) Bill, 2024, requires companies to utilize at least 80% locally produced raw materials, if available.

Amos Kankunda, Chairperson of the Committee on Finance, Planning and Economic Development, added that foreign car manufacturers must invest a minimum of $10 million, while Ugandan investors need $300,000, and citizens investing in rural areas need $150,000 to qualify for these incentives.

Finance Minister Matia Kasaija announced that Uganda has secured orders for electric and low diesel combustion buses from Tanzania, South Africa, Nigeria, and Eswatini, signaling a strong export market for the country’s burgeoning EV industry.

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