Global Electrification in Ukraine: Tax Exemption for Ecological Transport

by Meifan Honcharuk
Thursday, December 30, 2021
6 MIN
Global Electrification in Ukraine:  Tax Exemption for Ecological Transport

How will electric cars completely change the traditional car market in the next 10 years?

President of Ukraine Volodymyr Zelenskyy signed legislation on applying tax preferences for manufacturers and importers of electric vehicles.

According to Bloomberg (one of the two leading US financial information providers), global sales of electric vehicles will increase to 66 million by 2040, up from 3 million in 2020. The reason is a growing demand for eco-vehicles, lower battery prices and critical levels of CO2 emissions in the atmosphere.

The technology for the production of electric cars is constantly being modernized. For example, in 2012, an electric vehicle could travel only 170 km without recharging. Today, more than 500 models can travel, on average, 400 km without recharging.

The electric car market in Ukraine is growing rapidly every year. This year, more than 30 thousand electric vehicles have been recorded in the country, when only 2 years ago, in 2019, there were only 7012 such cars. The largest number of electric cars is concentrated in Kyiv, Lviv, Odesa and Kharkiv regions. 

Oleksii Prokhorenko, CEO of GT Invest, told us more about developing an ecological mode of transport and its support by the state.

Mobility as the key to a thriving city

The Ukrainian government strongly supports the development of sustainable mobility in Ukraine. Thanks to this, the country has grown the number of electric vehicles and electric charging stations. In the current realities, it's not difficult to find a high-speed and high-quality electric charging point. They can be found in cities with a population of over one million and on major highways. This and many other advantages of electric vehicles stir up the interest of the people and the state in the green mode of transport.

But it wasn't always this way. Only several years ago, charging stations were a rarity, and charging a car in the back took up to 8 hours, instead of the usual for us 15 minutes. This was a significant factor deterring people from buying electric vehicles.

The most significant initiative from the state was the signing of the law abolishing the value-added tax (VAT) for electric vehicles on August 12, 2021.

  • Until January 1, 2026, the import of vehicles with electric motors to Ukraine and the supply of cars with electric motors on the country's territory is exempt from VAT. This also applies to internal combustion engines that run on compressed or liquefied methane or biogas;
  • Until January 1, 2031, the import of goods imported by enterprises that create or modernize their production facilities to produce cars with electric motors is exempt from VAT;
  • Until December 31, 2035, tax breaks are provided for enterprises that produce vehicles with electric motors, electric motors, lithium-ion (lithium-polymer) batteries and chargers for them. But on condition that they channel the freed up funds for research and development work in electric transport, for the creation or re-equipment of the material and technical base, an increase in production, the introduction of the latest technologies.

Who benefits from the development of the electric transport sector?

Electric charging stations

Due to the increasing demand for electric cars, electric filling stations are built in gas stations, parking lots, parks, residential areas, etc. Today, more than 6 thousand points of charging stations have been installed in Ukraine, of which more than 600 are of high power.

There is a particularly increased demand for express chargers, which allow the most powerful electric cars to receive a charge sufficient to drive another 200 km in half an hour.

Auto parts manufacturers

Electric cars are much reliable than gasoline cars. Stainless steel and aluminum are used to produce electric vehicles, and these materials, as everyone knows, do not rust. But auto parts manufacturers should not despair, as there will be a demand for specific components of electric vehicles, sensors and batteries.

In the future, the demand for batteries will only grow, so the issue of recycling old batteries is gaining particular relevance. Tesla recently announced the ability to extract up to 92% of the minerals from used batteries for reuse. Last year alone, Tesla extracted 400 tons of copper and 1300 tons of nickel from the batteries.

Car manufacturers

The production of electric cars is more profitable in comparison with classic cars. To collect them requires significantly fewer components and labor costs. This means that it is possible to make production more profitable by reducing the staff by 2-3 times.

By 2025, the well-known Mercedes-Benz company plans to present 3 new models of electric cars, and by 2030 it will completely switch to the production of electric vehicles.

Dealerships and service market

The maintenance of an electric vehicle can vary from 6 months to a year, depending on the degree of operation. The maintenance cost is much cheaper than traditional cars, and it breaks down much less often.

As for spare parts, spare parts for hybrid cars and electric cars are practically the same. Manufacturers always hide the high-voltage battery and power cables in areas where the risk of damage in an accident is minimal. Some standard components, also found in an internal combustion engine car, are powered by a high voltage circuit, not the standard 12 volts. Full repairs of all units and blocks can only be carried out in dealership service centers.

Support for large investors and the trend for innovation

According to Oleksii Prokhorenko, reducing electricity prices from $0.053/kW - $0.062/kW and state support helps popularize electric cars. Seeing this, large investors have already chosen a successful business model for themselves — the production and sale of eco-cars.

Today, many global brands have developed and follow the tactics of converting our familiar models for electric cars.

Considering government support, a favorable geographical position, a vast intellectual and labor resource, Ukraine has great potential for producing innovative electric cars and their components.

It is home to the most prominent location of metals and lithium, a much-needed element for battery production. And given such a high interest in green energy and electric vehicles, the demand for these metals will only grow in the future.

Entrepreneurs investing in the EV business have guarantees, incentives, and ways to keep themselves safe. According to the recently adopted bill No3760, businesses with $30 million or more investments receive a guarantee of stability, legal assistance from the state, and tax incentives. The amount of state support cannot be more than 30% of the investment in the project, and the implementation period for the supported project is up to 5 years.

The project must create at least 150 jobs, with an average salary of 15% more than in the region where the project will be launched.

GT Invest Company is the largest operator in Ukraine and has a successful background in turning ideas into reality. We help with setting up a company. But the main objective of the company is to launch and manufacturing/" rel="dofollow">manufacture products for our clients. We are responsible for the success of our clients. It is vital for us to create and implement the output of finished products in our country, summarizes Prokhorenko.

 

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