Zambia Proposes Removing Customs Duty on Battery-Electric Vehicles & Charging Systems

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Here is some good news from Zambia. Presenting the 2024 National Budget, Hon. Dr. Situmbeko Musokotwane, Zambia’s  Minister of Finance and National Planning, announced that,

“… to continue promoting the usage of clean energy as well as supporting the green economy and climate change mitigation, I propose the following measures:

1. 1. a) Remove customs duty on electric motorcycles, electric vehicles, electric buses, electric trucks, and attendant accessories such as charging systems; and
   2. b) Reduce excise duty to 25 percent from 30 percent on hybrid vehicles designed for the transportation of persons.”

Once approved, these measures will be implemented on 1 January 2024. The removal of customs duty for full electric vehicles and the reduction of customs duty for hybrids is a very welcome development. This will help reduce the costs of electric vehicles in Zambia, making them more competitive with ICE vehicles from an upfront purchase point of view. EVs are already a better proposition from a total cost of ownership point of view, however, the high purchase prices remain a key barrier to widespread adoption, and therefore this move by Zambia will help catalyze the adoption of EVs.

The Zambian Electric Mobility and Innovation Alliance (ZEMIA) is a  non-profit organization dedicated to supporting the adoption, development, and growth of the electric mobility ecosystem in Zambia. ZEMIA played a key role in lobbying the Zambian government to implement these new incentives.

ZEMIA says:

The decision to eliminate customs duty on electric motorcycles, electric vehicles, electric buses, electric trucks, and charging systems in the 2024 National Budget is indeed commendable. It is poised to make EVs more financially accessible to a broader spectrum of Zambian citizens and businesses, fostering the adoption of cleaner and sustainable transportation. By doing so, this policy shift will significantly contribute to reducing greenhouse gas emissions, improving air quality, and enhancing public health.

Furthermore, the reduction in excise duty on hybrid vehicles designed for passenger transportation highlights a balanced approach towards promoting cleaner technologies. Hybrid vehicles offer lower fuel consumption and emissions compared to conventional internal combustion engine vehicles, making them a valuable part of the transition to more sustainable mobility.

However, while we recognise these positive steps, ZEMIA firmly believes that a more comprehensive set of incentives is needed to fully accelerate the adoption of EVs in Zambia and drive the country’s green transition. We propose the following additional measures:

1. 1. Zero VAT and Customs Duty: To maximize impact, we recommend completely zero-rating or waiving customs duty and VAT on EVs CKDs and associated Equipment & components, significantly reducing the upfront costs and making EVs accessible to a wider audience and at the same time promoting local assembly and manufacturing of EVs.

1. 2. Special Electricity Tariffs: Encouraging the use of electricity for EV charging through special tariffs and connection fees supports the transition to renewable energy sources and reduces the cost of EV ownership.

1. 1. Corporate Tax Incentives: Providing tax breaks for companies involved in the EV sector would stimulate investment and job creation in the green technology industry.
   2. Waiving Road Tax for EVs for five years: Temporarily exempting EV owners from road tax promotes sustainable mobility and provides economic relief to EV buyers.
   3. Waiving Road Tolls for EVs for a five-year period: This incentivizes EV adoption, reduces traffic congestion, and contributes to improved air quality and reduced greenhouse gas emissions.
   4. Infrastructure Development: Provide an enabling environment for private sector set up Charging Stations or enter into Public Private Partnership (PPPs) model for such initiatives aligned with infrastructure development such as establishing fast charging stations along main roads and requiring new fuel service stations to include EV chargers is essential for convenience and widespread EV adoption.
   5. Government Fleet Electrification: Committing to ensuring that at least 50% of all government vehicle purchases are electric vehicles sends a strong signal of commitment to the green transition and can stimulate EV demand.
   6. Distinctive Number Plates: Introducing green-marked number plates for EVs would raise awareness and recognition of electric vehicles on the roads, further promoting their adoption.

I must say this is an incredibly positive development for the Zambian EV ecosystem. Zambia now joins several countries in Africa, such as Ethiopia, Mauritius, and Rwanda, to remove or reduce customs duty on electric vehicles.

Zambia’s installed national generation capacity stands at about 3,500 MW compared to a peak national demand of approximately 2,300 MW. Zambia’s grid is also powered by some very clean electricity, with about 90% being powered by hydro. EVs in Zambia will therefore be powered with some exceptionally clean electricity. Electricity tariffs are very friendly too in Zambia. Residential tariffs are about USD 5 cents/kWh for consumption between 101 kWh and 300 kWh in a month and about USD 12 cents/kWh for consumption above 300 kWh in a month for commercial customers. The skyrocketing petrol and diesel costs mean that the value proposition of electric cars keeps getting better and better for Zambians looking to switch to electric vehicles.

About 2 years ago, Jesper Berggreen wrote an article in which he outlined how Zambia now had a new President who could help accelerate the world’s transition to sustainable energy. It’s great to now see Zambia’s government proposing these progressive measures now, such as removing customs duties for electric vehicles.

Zambia’s President Hakainde Hichilema recently returned from a state visit to China. During that visit, he met with BYD and CATL, which are some of the leading players globally in the electric vehicle and stationary storage ecosystem. President Hichilema said, “We have the natural resources, they have the technology. This is the symbiotic relationship we are pursuing with companies like BYD and CATL, who are the largest EV and energy storage battery manufacturers, to invest in Zambia.”

Exciting times for the EV sector in Zambia. I hope more countries on the continent also join the nations that are working to promote the adoption of electric mobility. Most countries on the continent are net importers of petrol and diesel, which take a huge chunk of import bill, draining these countries of scarce foreign currency. Increasing the adoption of electric vehicles will help reduce this import bill and pressure on foreign currency and of course, help clean up the air in our cities at the same time.

Images courtesy of ZEMIA