The Kenyan government has already announced plans to introduce a Finance Bill in 2024 that imposes a VAT on electric bikes, buses, and solar and lithium-ion batteries.
ABM, a Nairobi-based battery manufacturer, fears that the so-called eco-tax will push the price of a single 60-kilogram solar battery in Kenya by $312 (45,000 Kenyan shillings).
This contrasts with the number of registered electric vehicles and motorcycles that increased over five times, to 3,753 in 2023 from 2023.
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Impact Of The Proposed Tax
In such a case, the 3,753 EVs already registered in the country by 2023 would be affected if the proposed tax became effective.
Of that interest, the Transport Authority of Kenya will register 2,694 electric vehicles in 2023—a higher number than all the electric vehicles that had been registered at that point.
In this regard, in April 2024, Kenya proposed a draft e-mobility policy, which would encourage local manufacturing and assembly of electric vehicles. The e-mobility policy is expected to incentivise manufacturers and assemblers while encouraging local battery manufacturing, recycling, and repurposing efforts.
Kenya’s EV Industry
After the draft policy, M-KOPA, a national fintech platform, has inked a partnership with a ride-hailing platform, Bolt, to invest in over 5,000 new electric bikes to be put on the roads of Kenya over three years.
adiac BasiGo, a Kenyan electric mobility startup, has unveiled Kenya’s first specialised
assembly line to produce modern electric buses.
The recently tabled Finance Bill 2024 in Parliament intends to expand the country’s tax base to many more economic activities and do away with certain exemptions.
But the move has sent jitters that it will cripple or even kill the growth of EVs in the country. The levy’s introduction was termed completely untenable by Guy Jack, the CEO of Associated Battery Manufacturers, who added that the detrimental effects would also be passed on to the job market. What is also more worrying is that this interest and international investments in the sector will wane.
President William Ruto sees it as one means of improving the tax climate within the country so that it can service its debts. While Kenya plans to impose an EV tax, countries like Tunisia announced in 2023 that it will offer tax breaks and purchase incentives to boost its EV sector and meet its target of 130,000 electric vehicles by 2030.
New Taxes Threaten to Derail Kenya’s Budding Electric Vehicle Industry
The electric vehicle sector has only recently started seeing more action, with massive operations coming in over the past year from e-mobility startups such as Roam, Spiro, and Ampersand. Roam opened the region’s largest electric motorcycle assembly plant with an output of 50,000 electric bikes per year. With the endorsement of Ruto, Spiro kicked off its campaign toward introducing 1 million electric motorcycles in Kenya, together with setting up battery charging and swapping stations. It’s also the same companies that use ride-hailing apps, such as Uber and Bolt, that have kickstarted deploying hundreds of EVs into their fleets in Kenya.
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In Kenya, the number of EVs has, thus far, been driven chiefly by operators of motorcycle taxis, widely known as boda bodas, who have been keen to save on fuel. Tremendous price increases due to taxes would inevitably cause many potential EV users to consider other alternatives before adoption. Though not in town, this development was also bound to hit the increasing use of electric buses that some of Nairobi’s most prominent public transport companies are beginning to embrace.
The clause hosts a new tax regime that, according to Guy Jack, Chief Executive Officer of Associated Battery Manufacturers, “would affect jobs and is completely unsustainable,” he said in part of the statement released. Therefore, those within the sector are expected to put up stiff resistance to the bill through the public participation stage, before the country’s Parliament and through to its final enactment into law.
