In a move that could reshape the electric vehicle (EV) landscape in Kenya, the Finance Bill 2024 has introduced a value-added tax (VAT) on electric bikes, buses, and solar and lithium-ion batteries.
The proposed eco-tax is part of a broader effort to expand the country’s tax base and address national debt.
The new VAT could significantly impact the cost of green technology in Kenya.
For instance, the price of a 60-kilogram solar battery is expected to increase by $312 (45,000 Kenyan shillings), making sustainable energy solutions more expensive for consumers.
Despite the potential cost hikes, Kenya has seen remarkable growth in its EV sector.
Registered electric vehicles and motorcycles surged more than fivefold in 2023, with 3,753 EVs on the road by the end of the year.
This rapid growth is part of a larger push towards e-mobility, exemplified by the government’s proposal in April 2024 to encourage local EV manufacturing and assembly.
Several industry partnerships are also set to bolster Kenya’s e-mobility sector.
Companies like M-KOPA and Bolt have announced plans to introduce 5,000 new e-bikes over the next three years, while BasiGo has launched the country’s first specialized assembly line for modern electric buses.
However, the proposed VAT has raised concerns within the industry.
The CEO of Associated Battery Manufacturers warned that the tax could slow or stifle EV growth, potentially leading to job losses and a decrease in international investment.
From the government’s perspective, President William Ruto supports the tax, seeing it as a necessary step to improve the tax environment and manage the national debt.
This stance contrasts with other countries like Tunisia, which are offering tax breaks and incentives to boost their EV sectors.
The Finance Bill 2024 also includes measures to broaden Kenya’s tax base and reduce tax evasion, signaling a comprehensive approach to fiscal reform.
