Ukraine is in for a boom in affordable electric cars: cars will be cheaper than in Europe

Ukraine is in for a boom in affordable electric cars: cars will be cheaper than in Europe

The market for electric vehicles in the country could grow two- to threefold

Ukraine is in for a boom in electric cars. There are already more 4 thousand electric vehicles driving across the country, with half of them bought in 2017 year. In terms of market development, Ukraine is among the world's top five players. On Thursday, 7 December, the Rada voted for zero taxes on importing electric cars. Experts say this could increase demand for them by dozens of times. The website "Segodnya" found out whether cheap electric cars are coming.

Electric cars will be cheaper than in Europe

From the new year, Ukraine will exempt electric vehicles from taxes: VAT – 16,8%, and excise duty – 109 euros. The Pension Fund contribution remains – 4,8%.

VAT and excise exemption applies for a year – until 31 December 2018 year. The parliament also exempted taxi services with electric cars and rental and leasing services for electric vehicles from VAT. However, these changes still require the president's signature.

In November 2015 year, Ukraine canceled a 10% import duty on electric cars. As a result, in the country in 2016 and 2017 years the number of electric cars doubled.

Photo: pixabay.com

Cancellation of VAT and excise will increase sales tenfold, says Oleh Nazarenko, director of the All-Ukrainian Automobile Association of Dealers and Importers.

This will make electric cars cheaper than in Europe by 17%, forecasts co-founder of Tesla Club Ukraine Nazari ShimonDavid. For example, in Poland VAT on electric cars is 23%. Currently, Ukraine mainly imports used electric cars. But tax removal brings their price in line with internal-combustion engine cars.

"Demand for new cars will rise because the price of an electric car and a gasoline car will level out. And a driver will choose an electric car because it doesn't need to refuel with expensive gasoline. Earlier, an electric car paid off in two to three years; now its advantage will be evident immediately," adds Nazari Shimon-David.

Electrocars company expects the electric vehicle market to grow two- to threefold. And the expansion of electric cars will become noticeable in regional centers and small towns.

The most bought electric cars in Ukraine are Nissan Leaf, Ford Focus Electric, and Tesla, but officially they are not sold in the country. For now, Ukraine sells its own electric cars only from Mitsubishi, Hyundai, and Renault. Prices for new cars start from 35 thousand dollars. Used electric cars cost about twice as cheap.

For official Nissan Leaf or Tesla sales, one year of VAT exemption is not enough, notes Kravtsov.

"We expect Chinese companies to pay attention to the Ukrainian market," he adds.

High demand may trigger price increases

90% of electric cars purchased by Ukrainians are used Nissan Leaf from the USA. Car dealers buy cars at American auctions. However, in the last two months the price of a used car rose by 2000 dollars due to increased demand from Europe.

Because of a sharp rise in sales of electric cars, the number of intact cars at auctions has declined. By the end of November only 275 Nissan Leaf were sold, reports CEO of Electrocars Alexander Kravtsov.

A used Nissan Leaf after the tax zeroing will be cheaper by 1000 dollars, Kravtsov forecasts. Thus, a base model electric car in the United States costs 7-8 thousand dollars. But in Ukraine, in addition to taxes, other charges are added: logistics, port fees, which may rise due to demand for electric cars.

Photo: electrical-cars.net

As a result, the market for electric cars with damage may grow — the price of a wrecked car at auctions starts from 4-5 thousand dollars. They are supplied to Ukraine and repaired here. This will positively affect charging and service infrastructure in the country.

"Demand for 'lift' models at American auctions will grow manyfold. This will affect the starting price. Therefore, even if we don't consider the importer’s interest – for the end user the price of a used Leaf will fall by about 1000 dollars. Because VAT on such a car is not the key. But for premium segment – Chevrolet BOLT, Tesla, BMW with used cars – the price drop will be more noticeable," says Kravtsov.

But buyers may not feel the VAT exemptions due to higher demand, says Sergei Borovik, marketing director of the AIS Group of Companies.

"The lion’s share of used electric imports came in through gray market traders. That is, they already paid little or no VAT. For such 'dealers' nothing will change, neither in cost nor in prices," he explains.

Another constraint: among mass used cars, only one model is available for purchase — Nissan Leaf. This also limits demand for electric cars. Thus predicting changes in prices and volumes is quite difficult, Borovik adds: "We think the trend toward growth in the capacity of used electric cars will be slow but steady and long-term."

At the same time, the situation in the market for new electric cars is also unlikely to change significantly, he is sure. Today a new small electric car in class B costs in the EU about 30 000 euros. A new analogue with an ICE engine costs from 10 000 euros. Without VAT, the price of a new electric car may drop to 25-27 thousand euros.

"Admit it, this decrease will not change the situation of barely any demand for new electric cars," sums up Sergei Borovik.

What about charging stations for electric cars

Kyiv resident Bohdan Boyko charges his Nissan Leaf at home from a regular outlet for eight hours. At work, he tops up the car near the office — this allows increasing daily mileage from 150 km to 250-300 km.

"Up to 80% it charges quickly — about two to three hours. This is enough for 100 kilometers. The rest of the charging is slow. In total, charging lasts about eight hours from a regular outlet. At filling stations you can charge in three hours," Boyko shares.

Photo: 1Gai.ru

Ukraine is developing a network of charging stations at a rapid pace, notes Sergei Borovik. The auto business is also actively preparing for electrification.

"Equipment is being procured for service, charging stations are being installed for customers. Overall, you can speak of readiness of all interested parties for the growth of the electric car fleet," he says.

When there were more electric cars in the country, the market reacted on its own — charging stations appeared without government stimulation, explains Nazari Shimon-David. But the state should set technical requirements for these "electric fillings," says Oleg Rodin, director of E-Line, which installs charging stations for electric cars. For example, in Ukraine there are still few fast chargers that can charge a car in half an hour.

Next step — production of electric cars in Ukraine

The state should extend favorable conditions for importing electric vehicles, experts say, and also attract manufacturers to the country.

For this, Ukraine needs to abolish taxes for manufacturers of electric cars as well. Such a move would attract investors to the country, says Oleg Nazarenko.

"ICE vehicles are not made in Ukraine because production is sufficient in Europe and Russia. Therefore Ukraine could focus on producing electric cars and supplying them to neighboring countries, to the same EU," notes Nazarenko.

With tax exemptions for manufacturers in Ukraine, domestic production of electric cars could be revived. Since 50 years in Lviv, Kharkiv, and Zaporizhzhia various electric transport—from cars to electric buses and even trolleybuses—were produced. Periodically, domestic electric cars are showcased in Ukraine, but none have yet entered mass production.

The first Ukrainian electric car Synchronous. Photo: Ecotechnica.com.ua

"In Soviet times, electric cars were a promising development. Mass production began five to six years ago globally. Ukraine, with its Soviet-era developments and skilled personnel, has a chance to revive electric car production," says Oleg Nazarenko.

Also in Ukraine, taxes on importing and manufacturing charging stations should be abolished. This will develop infrastructure beyond cities. The more developed it is, the more people will buy electric cars without fearing getting stranded on the road. For greater infrastructure development, Ukraine also needs to change building codes so that when constructing shopping and entertainment centers and residential buildings, charging options are provided.

The Ministry of Infrastructure already has a project for developing electric cars. However, for about a year it sits on the desk. The ministry plans to abolish all taxes on importing electric cars until 2021 year. In addition, the government wants to cut corporate tax for car dealers and reimburse part of the car's cost to the buyer. For domestic manufacturers of electric cars, abolish VAT and introduce a preferential land tax rate until 2028 year; the Pension Fund contribution would be canceled only until 2021. They also plan to abolish the duty on importing components for electric cars and to provide a VAT deferral for six months.