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Electric vehicle tax incentives good but they need prolonging

Planned kids of these days may not know this but there was a time when car windows didn’t just open or close by pressing a button.

There was a winder that you needed to turn to close or open the window. Apart from the driver’s window, you had to stop the car, park somewhere, unbuckle the seatbelt and start the winding process.

You couldn’t press a button and all car doors locked or opened. You pressed a door lock one by one to ensure that the car is locked. Or you pulled it to ensure a car door one by one is unlocked. You probably now understand why a Ugandan locks the car today and then tries to open the door to confirm it has locked.

That is a result of locking the cars manually. That is by the way not very long ago. Power windows and central locking systems in cars are fairly recent even though the technology may have existed for decades elsewhere. There are still vehicles such as a particular Landcruiser that still comes in brand new with such windows.

Same with automatic gearbox cars. Ugandans preferred the manual ones and I know many people who still do. The argument most Ugandans made was that a manual car is easy to jumpstart. In case it failed to start, you just get a few people to push and once it gains momentum, you release the clutch pedal.

Many manual cars with faulty batteries are started that way, which is not possible with an automatic gearbox car. If it fails to start due to a faulty battery, you have to get another battery or vehicle to jumpstart it. Many Ugandans also argued that power window and door central locking systems in cars could lock you inside when they malfunction and discouraged anyone who could buy such a car.

Even today, many Ugandans including planned children fear newer-model vehicles. Their mechanics are fond of exclaiming that the vehicles have many electric components (amasanyalaze mangi nnyo) which is euphemism for lack of skills to repair them. So, you find many people buying old cars to avoid the most recent technology.

The same is said every time you hear of electric vehicles (EVs). To be fair, most of our garages aren’t yet skilled in repairing and maintaining these vehicles. They need to update their skills because there has been an increment albeit small in electric and hybrid vehicles in Uganda since the government removed import duty on them at least for the current financial year.

In the tax proposals for the next financial year, Uganda is to remove Value Added Tax (VAT) on electric vehicles or parts manufactured or fabricated in Uganda and supply of EV charging equipment and services. That would mean that such services, parts and/or vehicles would be 18% lower to ensure uptake.

This will certainly see more EVs on the market given the reduction in taxes that are expected to lower the price of such vehicles while leading to the build-up of the critical infrastructure necessary for increased electric mobility.

The mobility industry is one of the largest contributors to the world’s GDP, responsible for more than 13%, according to McKinsey and Company. In Uganda, in the financial year 2021/22, the Uganda Bureau of Statistics indicated that road vehicles account for 25% of our total imports, only third after petroleum and medical supplies.

Needless to add that petroleum products (worth $1.5 billion) are largely used to power vehicles. By incentivizing electric vehicle manufacturing, Uganda would be reducing its import bill while promoting the nascent automotive industry. Very many Ugandans are involved in the fabrication or making of car parts.

The guys in Kisenyi who make seats for drones (14-seater taxis), exhaust pipe makers in Nakulabye, brake pad makers in Katwe and the guys who remodel truck beds in Lugazi for the sugarcane industry; that is already a basis to build on.

If the Lugazi guys can reinforce truck beds and trailers to transport sugarcanes, they can be skilled to make web frames for buses using the right automotive steel and more modern welding systems. Government through Kiira Motors already owns two square miles of land in Kayunga where land can be provided for investors in this sector who may require it.

However, to see significant investments in the EV market, tax incentive proposals shouldn’t be just for one financial year. A year is such a short time to invest and recoup the capital.

The government can go a step further and ensure that these proposals are for a longer period such as five to 10 years. That way, investors would know that time is their best ally to invest and make a return on their investment.

djjuuko@gmail.com

The writer is a communication and visibility consultant.

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