Rwanda tax exempt on hybrid, e-cars starts to pay off

PHOTO

The tax exemption on hybrid and electric vehicles (EVs) seems to be paying off, as the number of imports for this type of cars has improved, keeping alive hopes of stemming auto carbon emissions.

Recent data from the Rwanda Revenue Authority (RRA) shows that hybrid car imports increased 237-fold between 2021 and 2024, with more than 7000 vehicles, both electric and hybrid, imported.

Hybrid car owners and sellers say the tax incentives on these cars has largely driven the high adoption. The details came even as Rwanda, unlike some countries, hasn’t yet upped its ante against fossil fuel users.

Ethiopia, for example, earlier this year banned importation of fossil fueled cars and advised foreign missions to only bring in electric or hybrid cars.

Yet in Rwanda, RRA data indicate that foregoing import duty, excise duty and VAT on hybrid/electric vehicles and their spare parts has cost the country up to Rwf14 billion ($10.36 million) in the last four years.

The idea of the tax exemption was to ease the financial burden of purchasing full electric and hybrid cars-that use both gas-powered engines and an electric motor, officials argued then. But hybrid adoption has by far outpaced electric vehicle adoption, according to RRA.

The EastAfricanIn 2020, only 19 fully electric vehicles were imported with no single hybrid car imported, in 2021 electric car imports increased to 38 and 28 hybrids.

In 2022 the number grew to 134 electric vehicles and 520 hybrids, before jumping to 103 electric cars in 2023 and 2,386 hybrids. In the nine months of 2024, electric car imports grew to 218 and hybrid vehicles surged to 3,726.“There is still limited supporting infrastructures for electric vehicles. For instance, charging stations for EVs are too few to even support the ones in the country. Because of that and lack of EV spare parts, hybrid cars have ended up having a high resale value compared to EVs, hence higher adoption” said Ronald Kaitare, who owns a hybrid car in Rwanda.

The rising fuel prices as a result of wars fought in Ukraine and Middle East, has also increased people’s appetite of hybrid vehicles, which have proved to consume way little fuel compared to regular fully diesel or petrol cars.

Most of the electric cars imported into Rwanda are South Korean brands like Kia, Hyundai, due to offering electric and hybrid vehicles, with latest functional technologies.

Happy about the progress made, this year government extended the tax exemption on electric vehicles to the 2024/25 fiscal year.

This decision was driven by the need for government to accelerate the transition to electric cars motorcycles, as government strives to reduce greenhouse gas emissions.

As of July 2020, the number of registered vehicles countrywide stood at 264,524, excluding security organs, embassies and government vehicles. This number has since grown to more than 300,000 cars.

Among other things, the report indicated that the transport sector is rapidly growing, with an annual growth rate of 12 per cent.

As of 2023, Rwanda imported cars worth $52.6 million compared to $33.03 million spent on importing cars in 2022, the United Nations COMTRADE database on international trade, indicating a spike in car importations in the post Covid-19 era.

Cars are the 9th most imported product to Rwanda, with Japan maintaining the lead as the country from which more cars are imported to Rwanda.

Currently, Rwanda imports cars worth $14.4 million from Japan, followed by South Korea ($8.04 million), South Africa ($5.97 million), United Arab Emirates ($5.26 million), and United States ($3.97 million).

With China among the fastest growing import markets for cars bought by Rwandans, particularly electric and hybrid cars, according the RRA report.