The Kenyan government is planning to present a Finance Bill in 2024 that will introduce a value-added tax (VAT) on electric bikes, buses, and solar and lithium-ion batteries. This legislative move is raising concerns among industry players, including the Nairobi-based Associated Battery Manufacturers (ABM), who fear that the proposed eco-tax could significantly increase the cost of solar batteries. Specifically, a 60-kilogram solar battery’s price could surge by $312 (45,000 Kenyan shillings) as a result of the tax.
The timing of this proposed tax coincides with a notable surge in the adoption of electric vehicles (EVs) and motorcycles in Kenya. The number of registered electric vehicles and motorcycles experienced a more than fivefold increase in 2023. The tax would also impact the 3,753 EVs that were registered in the country as of that year. A report from the Energy and Petroleum Regulatory Authority (Epra) indicates that in 2023 alone, Kenya’s transport authority is set to register 2,694 electric vehicles, surpassing the cumulative total of EVs previously registered in the country.
In an effort to promote the local EV industry, Kenya released a draft e-mobility policy in April 2024. The policy aims to stimulate local manufacturing and assembly of electric vehicles by offering incentives to manufacturers and assemblers. It also seeks to support the local production of batteries and to encourage recycling and repurposing initiatives.
In line with the draft policy, M-KOPA, a prominent fintech platform in Kenya, has collaborated with the ride-hailing service Bolt to introduce 5,000 new electric bikes (e-bikes) in Kenya over the next three years.
Moreover, the Kenyan electric mobility startup BasiGo has made strides in the sector by launching the country’s first specialized assembly line dedicated to the production of modern electric buses. This development represents a significant step forward in Kenya’s journey towards sustainable transportation solutions.
The introduction of the Finance Bill 2024 in the Kenyan Parliament is part of an effort to expand the nation’s tax base by encompassing a wider range of economic activities and removing certain tax exemptions. Among the proposed changes is the inclusion of electric vehicles (EVs) and related components in the taxable items, which has sparked concern within the industry.
Industry stakeholders, such as Guy Jack, the CEO of Associated Battery Manufacturers, have voiced their apprehensions, suggesting that the new tax measures could significantly hinder the growth of the EV market in Kenya. Jack has described the development as “completely unsustainable,” warning that it could lead to job losses and a potential decrease in both domestic interest and international investment in Kenya’s EV sector.
Despite these concerns, President William Ruto views the tax reform as a necessary step to enhance the country’s fiscal landscape and address its debt obligations. The government’s stance is that broadening the tax base is essential for generating the revenue needed to meet its financial commitments.
While Kenya is considering the imposition of an EV tax, other nations are taking a different approach to encourage the adoption of electric vehicles. For instance, Tunisia announced in 2023 that it would be offering tax breaks and purchase incentives to stimulate its own EV sector. The goal is to reach a fleet of 130,000 electric vehicles by the year 2030, as part of its broader environmental and energy sustainability goals.
