Rwanda EV policy bears results

October 28, 2024

From the newsletter

A recently released report by the Rwanda Revenue Authority shows that the tax exemption on hybrid and electric vehicles is paying off. The report shows a 237% increase in hybrid imports from 2021 to 2024, with over 7,000 total electric and hybrid vehicles imported.

  • Rwanda was one of the first countries in Africa to introduce incentives and tax exemptions for EV and hybrid vehicles to boost their adoption. 

  • Unlike other African countries like Ethiopia, which have implemented a complete ban on ICE vehicles, Rwanda focused on creating an attractive market for EVs and hybrids instead of discouraging the use of ICE vehicles through heavy taxation.

More details

  • Like many African countries, Rwanda relies on vehicle imports to meet its local demand. To encourage the adoption of electric and hybrid vehicles, the government introduced tax exemptions on import duties and excise taxes for these vehicles and their spare parts. 

  • While this initiative has cost the country an estimated $10.36 million over the past four years, it has spurred impressive growth in the electric vehicle sector, particularly for hybrid models.

  • One reason for the popularity of hybrids, according to hybrid car owner Ronald Kaitare, is the lack of charging infrastructure and readily available spare parts for full EVs. This has resulted in higher resale values for hybrids, making them a more attractive option for buyers.

  • The numbers reflect this trend. In 2020, only 19 fully EVs were imported, while no hybrids were brought into the country. By 2021, electric car imports increased to 38, with an additional 28 hybrids. 

  • This growth continued, reaching 134 EVs and 520 hybrids in 2022, and then jumping to 103 electric cars and 2,386 hybrids in 2023. In the first nine months of 2024 alone, electric car imports reached 218, and hybrid vehicles surged to 3,726.

  • Impressed by this progress, the Rwandan government extended the tax exemption on electric vehicles through the 2024/25 fiscal year. 

  • Rwanda's transport sector is experiencing rapid growth, with an annual growth rate of 12%. The total number of registered vehicles in the country has now surpassed 300,000, with cars ranking as the 9th most imported product.

  • In 2023, Rwanda spent $52.6 million on car imports, a significant increase from the $33.03 million spent in 2022. 

  • Japan currently leads as the primary source of these imports, with Rwanda purchasing $14.4 million worth of vehicles from the country. Other major import sources include South Korea ($8.04 million), South Africa ($5.97 million), the United Arab Emirates ($5.26 million), and the United States ($3.97 million). 

  • But China is emerging as a fast-growing import market, particularly for electric and hybrid cars.

Our take

  • It's clear that policy drives market growth, and Rwanda is a prime example of how effective policy and implementation can yield the intended results. Ethiopia's ban on importing ICE vehicles has tremendously increased the adoption of electric vehicles. However, many African countries struggle with policy implementation, often leading to disappointing outcomes.

  • Kenya, Nigeria, South Africa, and Morocco are following in Rwanda’s footsteps with favourable policies and incentives to support EV adoption. However, there's a lack of clarity regarding hybrid cars, as most of these countries haven't prioritised their adoption.

  • For a smoother transition to electric mobility, African countries should consider a two-pronged approach. Hybrid vehicles can serve as a crucial transition pathway to full EVs in the future.

  • Implementing EV-friendly policies, like those in Rwanda, will be a significant advantage for African countries with large-scale EV manufacturing capabilities, such as Morocco and South Africa, as they target export markets within the continent.