Dubai's latest electric vehicles incentives is a good start

Incentives need an industry and region-wide push

Dubai is backing the success of electric vehicles (EVs) – to the tune of millions of dirhams.

While the emirate is targeting at least 10 per cent of all newly purchased cars to be electric or hybrid between 2016 and 2020, only time will tell if the incentives it announced yesterday will be enough to prod the masses to change their preference in a country and a region quite wedded to their petrol engines.

Dubai is providing incentives to would-be owners of EVs, which include free public charging at more than 100 stations across the emirate until the end of 2019 as well as public parking in areas designated specifically for the plug-in cars. In addition, there will be road toll fee exemptions and 15 per cent off on all EV car registrations.

This is a great start and shows Dubai's commitment, but there may need to be a region wide push.

For example, there is still some uncertainty over value added tax (VAT) implications which will be at a standard rate of 5 per cent on cars. There’s a case to be made for making EVs tax exempt or zero-rated.

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Saeed Al Tayer, the managing director and chief executive of Dubai Electricity and Water Authority, said that VAT is applied at the federal level, so individual emirates have no sway in providing tax exemptions.

VAT is already a complicated matter, especially for a first-timer like the UAE. But there’s an added level of complexity in garnering a tax-free EV. Any decisions made by the UAE federal government must also work with the rest of the GCC member states, some of which may not introduce the levy on January 1, 2018.

Dubai is a first mover and it is not clear at the moment how other emirates and other GCC countries will approach the adoption of EVs.

A GCC-wide tax exemption for EVs would be a big boost if Norway’s example is anything to go by.

The Nordic country began zero emission incentive programmes in the early 1990s and gradually scaled up its offerings.

These began with no import taxes and increased to exemption from 25 per cent VAT on purchases, access to bus lanes and 50 per cent reduced company car tax.

In 2015, a 25 per cent VAT exemption on leasing came into effect and that year, 22 per cent of all vehicles on the Norwegian roads were electric.

The country announced earlier this year that it has extended its tax exemption programme for the eco-friendly rides, looking to have EVs make up 30 per cent of all vehicles in the country by 2020.