EV operators unhappy with cap on incentivised imports

Business operators making early moves in the electric vehicle market are still analysing the concessions proposed by the Government this week, but their initial take is that the measures are counterproductive.

The minister of finance announced a 20-point reduction in import duties on EVs, from 30 per cent to 20 per cent, for five years, but he also placed a limit on the number of vehicles that will benefit from the tax break, at 1,000 units.

The latter is counter, auto dealers say, to the expressed policy of the Government to grow the EV market and would limit their capacity to entice buyers and the amount of business they can do.

Evergo Jamaica, which is investing in charging stations, adds that the cap should at least be double what the minister has proposed.

The reduced duties would shave a little over $1 million off one of the lowest priced battery electric vehicles already available in Jamaica, the Nissan Leaf, Managing Director of Jetcon, Andrew Jackson, told the Financial Gleaner. Jetcon trades in pre-owned vehicles.

Still, he added that the cap on the number of vehicles that could access this benefit was too low.

“Every country needs some prodding for EV adoption. Our neighbours Barbados and Trinidad have no import duty on EVs. We have reduced it to 10 per cent, but then it is limited to only 1,000 vehicles. It’s counter-productive,” he said.

“When you have these limitations is it also a recipe for corruption,” Jackson added.

The measures announced by Finance Minister Nigel Clarke in his Budget presentation on Tuesday also included the removal of the annual registration fees on battery electric vehicles as a means of incentivising the purchase of the vehicles.

Electric vehicles are said to cost a third of what it takes to power a petroleum-fuelled automobile. Jamaica expects that within a decade, EVs will eventually grow to 12 per cent of the vehicles on Jamaica’s roads. Right now, the volumes of EVs and hybrids are less than 300, but expectations are that the EV market will increase to around 50,000 within a decade.

For Jamaica, the switch to EVs is complementary to plans around the country’s energy security, especially now when oil prices have exploded once again, reaching beyond US$130 per barrel last week, before falling back below US$110.

“We need to be strategic and think long term. Having such a dependence on oil for our energy needs is a risk to Jamaica’s economic security,” the finance minister said. “Look at what is happening today. There is no developed country that is as exposed to the price of oil as Jamaica. We must rid ourselves of this unhealthy dependence on oil,” he added.

Still, Clarke opted to place a cap on the incentivised portion of EV market cap, rationalising that by doing so, he would minimise the tax losses to $18 million over the five-year period. Last year, the Government earned $27 million in duties from the importation of electric vehicles.

PECULIAR POLICY

Dr Damien King, economist and executive director of think tank Caribbean Policy Research Institute, was also puzzled by the policy, saying “seems peculiar” and “paradoxical” although done with the intent of having a predictable 2022-23 fiscal Budget. King was speaking at the Victoria Mutual Investments Limited post-Budget forum on Wednesday.

Jamaica has about 250 full electric and plug-in hybrid vehicles on the market. In that context, the 1,000 cap seems reasonable, however, Evergo Jamaica, which is developing a national network of 300 charging stations, estimates that EVs on the island will grow by a minimum 2,500 units by 2023. That forecast predated the Ukraine-Russia crisis.

“It will bring significant cost savings to consumers, and it makes sense when you look at it from the Government’s perspective. But is a 1,000 per year really enough? I would say no. What you will probably end up having is a lottery,” said Evergo Jamaica CEO Wayne McKenzie.

A more reasonable cap, if any at all, he said, would be 2,000 vehicles.

Auto traders are still trying to get clarity on whether the import duty on EVs exceeding the 1,000 cap will be tiered or be subject to the full 30 per cent charge. It is also not clear whether the new tax policy will only apply to battery or full EVs or include plug-in hybrids. Those issues are to be addressed by Clarke at a later date.

karena.bennett@gleanerjm.com