The government has refused to extend electric-car incentives: what it means for the market and buyers

Ukraine has officially ended preferential customs clearance for electric vehicles. The Cabinet of Ministers rejected the Verkhovna Rada’s proposal to extend tax incentives for the import and sale of electric vehicles for another year. The decision was driven by Ukraine’s commitments to the International Monetary Fund and the risk of reduced state budget revenues.

Why the incentives are being eliminated

According to the draft state budget for 2026, the government did not support extending the VAT exemption for electric vehicles. As a reminder, currently, no VAT is levied on the import and purchase of electric vehicles, and the excise tax amounts to just 1 euro per 1 kWh of battery capacity. These rules remain in effect until January 1, 2026.

However, the Cabinet of Ministers has indicated that extending these exemptions would lead to:

• a loss of budget revenue from VAT

• a breach of the terms of the memorandum with the IMF

• a risk of underfunding key government programs

In the memorandum dated June 19, 2025, Ukraine committed not to expand tax incentives that could reduce the tax base.

How the Exemptions Worked Previously

The VAT exemption for electric vehicles was adopted by the Verkhovna Rada in July 2021 to encourage the transition to eco-friendly transportation and the development of charging infrastructure. As a result:

• imports of electric vehicles increased significantly

• the EV market became one of the fastest-growing in Europe

• Ukraine moved closer to meeting European targets for reducing CO₂ emissions

How the repeal of tax breaks will affect prices

Experts predict:

In other words, if a car currently costs $25,000, its price could rise to approximately $29,000–30,000 once the tax credit is eliminated.

What’s happening with the electric vehicle market in Ukraine right now

In 2025, electric cars became the top-selling category among new vehicles for the first time.
Since the beginning of the year, Ukrainians have registered nearly 50,000 electric cars.
Major cities offer additional benefits:

• Preferential parking

• Access to public transit lanes

• An expanding network of fast-charging stations

However, experts warn that rising costs could slow the market’s growth.

Conclusion

The elimination of incentives for electric vehicles is a decision linked to Ukraine’s financial obligations to the IMF.
But it could affect the affordability of electric cars and the pace of the transition to eco-friendly transportation.

Buyers who were planning to switch to electric vehicles should consider making a purchase before the end of 2025, while the incentives are still in effect.

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