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Sunday, 20 September 2020

Gov’t turns to customs breaks to spur EV revolution

Gov’t turns to customs breaks to spur EV revolution: The government is cutting to 10% the total value of local content needed to qualify for customs breaks on components imported for locally-assembled cars, according to a presidential decree issued by President Abdel Fattah El Sisi this weekend. Under a 2018 decree, importers were able to claim customs discounts of up to 90% provided local content accounted for a minimum of 30% of the finished product. The decision last week lowered the threshold to 10%, and in a move designed to encourage local assembly of EVs, expanded the list of eligible importers to include companies involved in the manufacture and assembly of EVs.

So what’s covered? The discounts apply to imported components used in setting up EV charging or natural gas refueling stations, inputs brought in to outfit cars with dual-fuel, electric, or natural gas engines, or parts used to set up renewable energy plants. Importers of those components, which are currently subject to a 2% tariff, will be eligible for customs breaks on a sliding scale provided they’re engaged in domestic manufacturing or assembly. How much of a break the importers receive will depend on the percentage of locally-sourced inputs used in their final products.

Background on the natgas transition: The Sisi administration earlier this year announced a multi-year plan to convert or replace 1.8 mn cars to run on both gasoline and natural gas. Owners of vehicles over 20 years old will receive low-interest loans through the MSME Development Agency to purchase new dual-fuel vehicles as part of a EGP 1.2 bn package announced in August (those with younger vehicles will be able to access zero-interest finance).

Background on EVs: A new framework to encourage the use of EVs has also been in the works since last year under instructions from El Sisi. A cornerstone of this framework involves subsidies of around EGP 50k that will be doled out for the first 100k locally produced EVs. The first large-scale production operation is set to begin in 2021 under an MoU signed in June between the Metallurgical Industries Holding Company (MIH) and China’s Dongfeng Motor Corporation, and is expected to cost EGP 500 mn to get off the ground.

WANT TO DIVE DEEPER? Take a deep dive into the natgas conversion plan with our three-part series in Hardhat: part 1, part 2 and part 3. Or learn more about whether Egypt is ready for EVs in a recent edition of our weekly probe into everything infrastructure.

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