Kenyan president William Ruto was recently in the USA where he announced plans to waive taxes on the first 100,000 two-and four-wheeler electric vehicles locally assembled in the country. This came alongside news that Roam, BasiGo and Mogo had each secured direct loans of USD 10 million from the American government. Indeed, this was a big boost for the Kenyan EV sector.
How the tax waiver will be implemented remains a cause of concern given EV assembly is already ongoing in Kenya. Currently, there are about 40 local e-mobility startups in Kenya.
However, the major concerns the Kenyan E-mobility sector has today are the contents of the Finance Bill 2024. The new bill would slap a value-added tax (VAT) on electric bikes, buses, and solar panels, along with lithium-ion batteries. This could significantly increase the cost, especially for solar batteries, according to industry reports. For example, the Eco levy on lithium batteries of KES 750 per Kg may lead to an estimated price hike of KES 45,000 for a typical 60-kilogram battery.
“A small lead acid battery for a motor vehicle is 12kg, with a retail price of Ksh 8,500/=. The Eco tax for this small battery will translate to an ADDITIONAL Ksh 9,000/= plus VAT. Therefore, a small car battery will retail at Ksh 17,500/=. This translates to an increase of 120% as a direct result of the proposed ECO tax. On a large solar battery that weighs 60 kilograms, the ECO tax will add an additional Ksh 45,000/=, ” reads part of the statement from Associated Battery Manufacturers (EA).
Excise duty usually seen as “sin tax” is also proposed for the EV sector. The government is considering reintroducing a 10% excise duty on top of a minimum fixed fee of KES 12,952.83 per motorcycle. This could make electric motorcycles less affordable for consumers, especially for new companies entering the market.
E-mobility Policy
Ironically, electric mobility aligns with Kenya’s National Climate Change Action Plan (NCCAP) 2023-2027, Long-Term Low Emission Development Strategy (LT-LEDS) 2022-2050, and the Nationally Determined Contribution (NDC) to reduce greenhouse gas emissions by 32% by 2030. In April, the draft E-mobility policy tailored to push local assembly and manufacturing of electric vehicles was made public.
READ: Kenya Electric Vehicles Get Special Green Number Plates
If approved, the policy will mandate zero-emission vehicle (ZEV) sales targets and set investment criteria for car manufacturers and assemblers to qualify for government incentives. It will also introduce clear, gradually implemented requirements for local content, ensuring the use of locally sourced materials in electric vehicles (EVs). Additionally, the policy will promote the production of EV components and support initiatives in local battery manufacturing, recycling, and repurposing.
The EV sector in Kenya has benefited from favourable policies, with the number of electric vehicles growing from 796 in 2022 to 4047 in 2023. E-mobility startups in Kenya have received the most funding in the region. In March last year, Roam unveiled East Africa’s largest electric motorcycle plant.
If the finance bill proposals are approved, the cost of electric vehicles and associated services like battery swapping will rise.
EV Sector Tax Waivers
In other parts of the continent, efforts to make electric vehicles more affordable are taking shape. The Malawian government eliminated import and excise taxes on electric vehicle chargers, trucks, buses, cars and motorcycles during the 2023/24 financial year. The government has also extended this benefit to electric motorcycles as well. It’s important to note that a 16.5% value-added tax (VAT) still applies to all electric vehicles.
Ethiopia is also making electric vehicles more affordable. The government eliminated all VAT, surtax, and excise taxes for EVs. They’re also giving a big boost to local manufacturing by waiving customs duties on electric vehicle parts to be assembled in Ethiopia. There’s a small 5% duty on partially assembled kits, and a 15% duty on fully built electric vehicles imported directly.
The Eastern Africa country had ambitions for 148,000 electric cars and buses by 2030, but surging demand has them accelerating towards 439,000 EVs.
Tunisia, Rwanda and Uganda
Across the continent, Rwanda has been leading the EV sector policy charge, offering a suite of incentives to attract investors. This includes free land for charging stations, discounted electricity for EVs, and tax breaks on electric cars and parts. It is no wonder Chinese EV manufacturer, BYD, set up presence in the country. Kenyan company BasiGo, has promised to have 200 electric buses operating in Rwanda by 2025, with an outlay of $40 million.
On its part, Tunisia is focusing on making charging infrastructure more affordable by cutting import duties on equipment and reducing VAT. The country is also offering citizens $3,200 in purchase incentives to switch to EVs.
Uganda, the first African country to produce an electric bus in 2016, waived import duties on electric motorcycles and scooters, offering VAT exemptions on all EVs, and even has special electricity rates for charging stations.
Zembo Motorcycles, a provider of electric motorcycles in Uganda, announced a strategic partnership with MOGO Uganda, a subsidiary of Eleving Group, to expand access to electric mobility solutions nationwide.
Due to the partnership, MOGO will enable Ugandan clients to purchase their preferred electric motorcycle model from Zembo through a financing option that includes a down payment of UGX 500,000. Thereafter, clients will pay weekly installments that fit their budgetary limits.
Read: KPLC Targets E-mobility With Ksh 10 Billion Network Expansion
Dakar Electric BRT
Dakar Mobilité, a Senegalese company co-owned by the government’s investment fund (FONSIS) and Meridiam (a private infrastructure developer), secured €135 million to launch Dakar’s electric bus rapid transit (BRT) network. This funding came through collaboration between Proparco (French development finance institution), EAIF (Emerging Africa Infrastructure Fund), PIDG TA (technical assistance from the Private Infrastructure Development Group), and the European Union.
Dakar’s electric BRT covers an 18.3 km route serving residents from downtown to Guédiawaye in 45 minutes. It will have 23 stations in 14 districts with an estimated 300,000 daily passengers. In addition, it is set to create 1,000 local jobs.
To fund the project, €85.4 million was secured as a split loan from EAIF and Proparco. An additional €6.4 million loan from these same organizations will cover future battery replacements for the buses. The EU and PIDG TA provided grants of €7 million and €9 million respectively, completing the funding package. Dakar Mobilité will manage the BRT system for the next 15 years. Last year, Kenya also signed a deal to build an electric BRT system although the discussions on that matter have gone mute.
Globally, BYD opened a new dealership in Brazil. This marked the 100th dealership for the Chinese automaker that is taking over the EV market from front runners Tesla.
