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All EVs In Ethiopia Now Exempted From VAT, Surtax, & Excise Tax

A number of countries in Africa depend on fossil fuel imports to meet their energy requirements in the transport sector. These fossil fuel imports constitute a good chunk of the total import bill, draining the countries of the much needed and scarce foreign currency. We have looked at a few of these countries recently. Examples include Zimbabwe, where major imports are mineral fuels and mineral oil products, at 19.2% of the total imports bill according to Zimbabwe National Statistics Agency (ZIMSTAT). Kenya is another example. Last year, petroleum products imported by Kenya increased by 12.0% to 6.4 million tonnes in 2021, costing the country a whopping $3 billion! In Ethiopia, fuel imports consume about $4 billion annually.

Accelerating the adoption of electric vehicles and then substituting foreign currency draining fossil fuel imports with locally produced clean electricity will go a long way in boosting these economies. Ethiopia’s grid is powered 100% by renewable energy (hydro and some wind). According to IRENA, of the 15,075 GWh generated in 2020, 14,404 GWh were from “hydro and marine” and wind contributed 609 GWh. Ethiopia is gradually adding more hydro capacity as the 5,150 MW Grand Ethiopian Renaissance Dam (GERD) units are gradually phased in. The GERD will add another ~15,500 GWh of clean electricity to the country’s energy mix.

Ethiopia has already been attracting investment into the electric vehicle sector. Marathon Motor Engineering, a joint venture between Hyundai Motor Company and Olympic Champion Haile Gebrselassie, started assembling the all-electric Hyundai Ioniq in Ethiopia in 2020. Another firm, Greentech Africa has been selling electric vehicles, energy storage, and water purifiers in Ethiopia.

To supercharge the adoption of electric vehicle in the country, the Ethiopia’s Ministry of Finance recently exempted all electric vehicles from VAT, Surtax, and Excise Tax! They went further to exempt completely knocked down kits from customs duty tax. This move will encourage local assembly and component manufacturing sectors for electric vehicles.  Semi-knocked down kits will attract a customs duty tax of 5% and fully built electric vehicles will have a customs duty of 15%. The Reporter reports that Ethiopia’s Minister of Transport and Logistics has a 10-year plan and intends to support the import of at least 4,800 electric buses and 148,000 electric automobiles as part of that plan to catalyze the adoption of electric vehicles in the country.

This is a very positive development. The removal of from VAT, Surtax, and Excise Tax will also bring down the price of fully built imported EVs immediately while local assembly firms scale up. Kenya, Zimbabwe, and other African counties that import fossil fuels, draining them of some much needed foreign currency, need to do the same. Rwanda recently introduced a comprehensive suite of fiscal and non-fiscal incectives. Ethiopia has just joined in the action and it looks like the East African EV landscape is shaping up nicely. Let’s hope other countries in East Africa and all around the rest of the continent follow soon.

 
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Remeredzai Joseph Kuhudzai has been fascinated with batteries since he was in primary school. As part of his High School Physics class he had to choose an elective course. He picked the renewable energy course and he has been hooked ever since. At university he continued to explore materials with applications in the energy space and ending up doing a PhD involving the study of radiation damage in High Temperature Gas Cooled Nuclear Reactors. He has since transitioned to work in the Solar and Storage industry and his love for batteries has driven him to obsess about electric vehicles.

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