Russia cancels import tax for electric cars in hopes of enticing drivers

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Publish date: April 16, 2020

Written by: Anna Kireeva

Russia has canceled import taxes for electric cars for the remainder of the year in an effort to stimulate purchases of zero-emissions vehicles and broaden the charging infrastructure needed to keep them running.

Russia has canceled import taxes for electric cars for the remainder of the year in an effort to stimulate purchases of zero-emissions vehicles and broaden the charging infrastructure needed to keep them running.

But both the sticker price of EVs and the economic woes brought by coronavirus shutdowns will likely hobble those efforts for the foreseeable future, electric car experts in Russia have said.

The zero-tax rate applies to electric cars brought into the Eurasian Economic Union ­– which alongside Russia includes the former Soviet republics of Armenia, Belarus, Kazakhstan and Kyrgyzstan – and will last through December 31, 2021. Both businesses and individual buyers will be able to take advantage of the tax break.

Russia’s has attempted similar tax relief packages before – between September 2016 and August 2017 – but the benefit only applied to businesses, not individual drivers, who were still burdened with up to 54 percent of the customs value of the electric cars they were buying.

Despite these hiccups, the number of both electric cars and charging points in Russia, while still modest, continues to grow. Last year, 323 new electric cars were sold in Russia, which was two and a half times more than sold in 2018. More startling figures are seen in the used electric car market, where 3,303 units were sold last year, a 48 percent increase over the previous year.

Iya Gordeyeva, who heads up Russia’s Association for Development of Electric, Unmanned and Connected Transport and Infrastructure, said the effect of the new tax break for electric car owners is hard to calculate. As the coronavirus continues to spread, shutting down most of the world’s economy, income levels among Russians are dropping precipitously.

“I think that Russia will see a drop in demand for cars in principle,” Gordeyeva said. “As for cancellation of the customs tax, this will save drivers about 15 percent. But as the ruble depreciates, the prices will remain at the level they were before the tax was cancelled.’

Indeed, Gordeyeva doesn’t think the tax break goes far enough. She pointed to the experience of neighboring Belarus, which abolished both import taxes and value added taxes, or VAT, reducing the price for electric cars by as much as 35 percent.

“That’s very significant,” she said. “If you only abolish the import tax, fluctuations in the exchange rate won’t allow the number of electric cars in our country to significantly increase.”

nils_charger-murmansk Bellona's former General Director Nils Bøhmer, far left, plugs in the Park Inn's new e-car charger. Credit: Lev Fedorov

Regional perks for EV owners

In other countries, major incentives for electric car owners come in the form of subsidies, tax breaks, special parking privileges and other perks meant to stimulate emissions-free vehicles purchases. Russia can yet boast of any measures like this at the federal level. But many regional governments have begun to take measures into their own hands.

Moscow and St Petersburg, for instance, have already abolished transport taxes for electric car owners and given them coveted free parking in their busy city centers. The regions of Kaliningrad, Kaluga and Tyumen have done the same.

The Ulyanovsk region has gone even further. Aside from abolishing the transport tax, authorities there have mandated that their official civic vehicle fleets will now be all electric. Public transport, like busses, will be electric, too. Ulyanovsk has also committed to building out a charging infrastructure. It’s an ambitious mandate for a region where only 11 electric cars are registered.

Small gains in the Murmansk Region

Earlier this year, the Murmansk regional parliament failed to support a bill that would have offered local EV drivers perks similar to those in other regions. But the argument at least put a public focus on zero-emissions transport. While the Murmansk region currently has only one registered electric car, its one local EV charging station, which was donated by Bellona, has already been used to fuel at least 50 electric cars. It also serves as a way station for EV drivers from Norway and Finland.

In the summer of 2018, Bellona staged an electric car rally in the Murmansk region, which drew EV drivers from as far as Moscow, St Petersburg and Norway. The effort illustrated the need for a more robust charging infrastructure in the area.

Since September of last year, a second charging station opened in the nearby city of Zapolyarny, an industrial town close to the Norwegian border. That charge point has so far serviced three Scandinavian EVs.

“There are people who believe that the time for such benefits has not yet come, that there are too few electric cars,” in Russia, said local parliamentarian Maxim Belov, who was one of the authors of the EV bill Murmansk’s parliament rejected earlier this year. “But our task is precisely to create the conditions that give people an incentive to purchase environmentally friendly cars.

EV Charging Infrastructure_ThinkstockPhotos-167427226 Electric car in charging Credit: Think Stock

Belov plans to reintroduce his EV bill during the Murmansk parliament’s spring session.

“By applying a privilege system and creating the necessary infrastructure for charging electric vehicles, our Norwegian neighbors, living in the same climatic conditions as the residents of the Murmansk region, set a record for selling cars with electric motors in June of 2017,” a footnote to Belov’s proposed legislation reads. It adds that should the law enter into force by 2021 it would “contribute to the growth of potential consumers and their motivation to purchase electric cars in order to reduce their own family budgets.”

Belov says that Murmansk’s governor, Andrei Chibis, supports his legislative proposal.

Giving batteries a second life

Skeptics of electric cars often fault the fact that metals necessary for the production of their batteries is often mined in a manner that isn’t environmentally friendly. They also bemoan that their batteries cannot be recycled. Why the first point is hard to refute, the second is easier to take on. Indeed, many companies worldwide are tackling the issue of battery recycling.

For instance, old batteries can still be used to store energy. Their cells can be used as energy storage for power networks and energy companies, as well as for industrial purposes. Batteries can also be disassembled so their cells can be reused.

In early 2020, Finnish energy company Fortum, the German chemical corporation BASF, and Russian nickel producer Norilsk Nickel signed an agreement of intent to create a battery recycling cluster in the Finnish city of Harjavalta. Reusing important metals contained in used-up lithium-ion batteries – metals like cobalt and nickel – would ensure a closed-loop economy and significantly reduce the carbon emissions involved in mining these metals for use in electric cars.

“The more electric vehicles there are, the more batteries will appear, and the issue of disposal will arise as a serious question, ”Gordeeva explained. ‘At present, this is not an urgent problem because warranties on batteries are from five to eight years, depending on the electric vehicle – which, of course, doesn’t mean the end of their life. They can be uses as energy storage, then disposed of.”