Duty cuts in plan to promote electric vehicles

Under a vision to have 30% of the country's total transports electricity-run to cut emissions, the government is now working on a roadmap to cut duties and offer incentives from the next fiscal year to encourage import, assembling, and local production of electric vehicles (EV).

A high-powered committee formed by the Cabinet Division has suggested a tax holiday until 2040 on local manufacture of EV in addition to gradual reduction in customs duty on machinery and parts used in manufacturing.

Currently, the import duty rate on electric vehicles is 89%, including 20% supplementary duty. The registration fees for EVs are the same as other vehicles.

Registration fee for EVs could be reduced, while tax breaks could be offered for use of solar power in charging stations, said Cabinet Division Secretary (coordination and reforms) Md Mahmudul Hossain Khan, who chairs the committee tasked with finding ways to promote the electric vehicle industry.

The committee feels that customs duty structure needs to be redefined in different tiers in 2030, 2035, and 2041 to facilitate local assembling and manufacturing of electric vehicles, the secretary told The Business Standard, referring to the committee's first meeting held on 23 January.

Import and local production of lithium batteries as well as setting up of charging stations should also get incentives, the committee says.

Road Transport and Highways Division Secretary ABM Amin Ullah Nuri also said they will meet the National Board of Revenue on fiscal incentives to facilitate electric vehicle import and usage.

According to Bangladesh Electric Mobility Roadmap prepared by the Road Division, the transport sector is responsible for 15% carbon emission of the country.

Though electric-battery run vehicles, mostly three-wheelers, have been in operation in the country for years, only 400 electric vehicles have so far been registered since a guideline was put into effect in April last year.

The government has pledged under the Paris Agreement to cut carbon emissions by 3.4 million tonnes in the transportation sector, which will require raising the ratio of electric vehicles to at least 30% of total vehicles by 2030, Road Transport and Bridges Minister Obaidul Quader said last year.

Ground getting ready

To match the long-term vision of becoming a high-income country by 2041, the government aims to develop an efficient, cost-effective, and less-polluting transport network, focusing on using more electricity and less fossil fuel.

The Perspective Plan-2041 estimates that travel demand in Bangladesh will increase from 246 billion passenger-km (BPKM) in 2021 to 2,072 BPKM by 2031 and 4,215 BPKM by 2041.

In this context, the World Bank is assisting Bangladesh in setting a long-term vision for public transport development and electric vehicle use, as well as developing an action plan to achieve this vision.

The Asian Development Bank expressed interest in collaborating with Bangladesh on this matter during a meeting with the Energy and Mineral Resources Division on 3-4 March.

Although scattered, the government has already prepared some policy guidelines and taken up steps to encourage electric vehicles. 

A policy has been developed for the registration and operation of electric vehicles, and the transport authority has started registrations of EVs. 

Additionally, guidelines for EV charging have been prepared by the division. The division is also installing vehicle charging stations at gas stations as part of its plan. 

Currently, about 20 charging stations have been installed nationwide for such vehicles, and there are plans to establish an association for traders in this sector.

Furthermore, the Bangladesh Road Transport Corporation is taking projects to procure electric vehicles, and discussions are ongoing with a Korean company for a $10 million project to establish charging stations.

The Road Division Secretary Nuri told TBS that promoting electric vehicles aims to cut down carbon emissions, reduce reliance on fossil fuels, and foster a smart, sustainable transportation system. 

"Currently, 63% of the country's fuel oil is used by transportation. This trend will drive up energy demand. Transitioning to electric vehicles can cut carbon emissions and lower fuel oil import costs," he added.

The Center for Policy Dialogue (CPD), a non-governmental think tank, proposed providing incentives for the import of electric vehicles while discouraging import of fossil fuel-powered ones in the next budget. 

They suggested increasing taxes on fossil fuel vehicle imports and lowering taxes on electric vehicle imports to align with this goal.

Facilities in plan

Currently, the registration costs for petrol-powered vehicles and electric vehicles are the same.

For instance, a 100cc motorcycle and a 5KW electric motorcycle both cost Tk2,000 to register. Similarly, three-wheelers have a registration fee ranging from Tk1,000 to Tk1,800, regardless of their power source.

The registration fee for vehicles with up to 600cc engine capacity and electric vehicles with up to 30KW engine capacity is Tk9,000, increasing for higher capacity vehicles.

Moreover, the registration fee remains unchanged for larger vehicles like microbuses, minibuses, cars, and jeeps with engine capacities exceeding 2000cc for petrol-powered vehicles and 100KW for electric vehicles.

This year, the Bangladesh Reconditioned Vehicles Importers and Dealers Association has proposed the withdrawal of supplementary duty in its budget discussion.

Md Habib Ullah Dawn, president of the association, told TBS that very few electric cars are imported in Bangladesh because of high tariffs and lack of proper infrastructure.

"The future is electric cars. As a result, duty exemption and other benefits must be ensured in this sector," he added.

Govt initiatives on EVs

The BRTC is undertaking five electric vehicle projects totaling Tk3,450 crore. These include plans for 100 electric double-decker AC buses, 200 electric single-decker AC buses, and 55 charging stations. 

One of the projects involves training 500 people in EV driving and 100 in operating charging stations.

Implementation is scheduled to start gradually in the next fiscal year.

EVs now in Bangladesh 

According to importers, the EV, a Tesla, arrived from the US in 2017, followed by more from brands like Audi and BMW. China's BYD brand cars are also now available with Runner Automobiles handling their import and sales.

Hafizur Rahman Khan, chairman of Runner Automobiles, stated that their company decided to start marketing EVs considering the government's vision for a Smart Bangladesh, which includes promoting a smart transport system and encouraging the use of electric vehicles. 

He mentioned that traders are expressing interest in investing in the sector, and there are plans to establish an organisation specifically for traders investing in this sector.

Several other companies, including Progress Motors Imports Limited, Executive Motors Limited, and Rancon British Motors, among others, are importing and marketing electric cars in Bangladesh. 

Bangladesh Auto Industries Limited has invested Tk1,440 crore in a factory in Mirsharai, Chattogram, to produce electric vehicle components such as bodies, batteries, motors, and chargers.

Despite the growth of electric vehicles, Bangladesh still heavily relies on fuel oil-dependent vehicles, especially diesel-powered public and cargo transport vehicles. 

However, there has been a rise in the use of hybrid vehicles, which run on both petroleum and natural gas and electric power. Nearly half of the imported cars are hybrids.