Kenya is in the middle of a fuel crisis, and President William Ruto is responding with a policy shift that has been a long time coming.
On Friday, speaking at State House Mombasa after meeting transport sector stakeholders, Ruto declared that the first 100,000 electric vehicles (EVs) imported into Kenya will come in duty-free.
The waiver covers both private and public service vehicles. He also announced that the government has already ordered 3,000 electric vehicles through the Ministry of Interior, intended for security and administration officials.
This announcement did not come out of nowhere. Kenya’s energy regulator has raised retail fuel prices by as much as 23.5% in the latest review, following a 24.2% hike the month before, as the conflict in the Middle East squeezes global oil supplies.
Diesel in Nairobi hit KES 242.92 per liter in the most recent EPRA review, and warnings from government officials and oil marketers suggest prices could still breach the KES 300-per-liter mark if the Middle East crisis drags on.
That prospect set off a nationwide matatu strike that stranded commuters across the country earlier this week, and matatu owners only called off the strike after meeting with Ruto at State House Mombasa on May 22.
Much of the fuel pain is structural, not just cyclical. Fuel prices in Kenya include several taxes and charges, including excise duty, VAT, road maintenance levy, and petroleum development levy, meaning that even when global prices ease, these fixed levies keep pump prices elevated.
Kenya is also a net importer of petroleum, so every dollar move in global crude prices shows up directly at the pump. The country’s annual petroleum import bill is currently estimated at around $5 billion, placing considerable strain on foreign exchange reserves and exposing the economy to global fuel price volatility.
READ: Kenya Relaxes Fuel Sulphur Limits for Diesel and Petrol Amid Supply Disruptions
Subsequently, the EV announcement is both a crisis response and a longer-term signal. Ruto said the government is engaging private investors to set up local EV manufacturing facilities and wants Kenya to become a regional hub for electric mobility.
He also pointed to plans involving East African partner states and the private sector to develop oil production from the Turkana reserves and build a regional refinery, which would reduce the country’s dependence on imported refined fuel.
The question most Kenyans will have is a practical one: does a duty waiver actually make EVs affordable? The short answer is that it helps at the margins.
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EV buyers currently face a 10% import duty on completely knocked-down electric vehicles, a 25% import duty on lithium-ion batteries, and a 25% import duty on EV charging infrastructure.
Removing those costs will lower prices, but the upfront cost of an electric vehicle remains out of reach for most households. The policy will likely benefit matatu operators, fleet buyers, and businesses before it reaches individual consumers.
There is also some local industry already in motion. Rideence Africa Limited is investing KES 320 million to assemble electric vehicles at the Associated Vehicle Assemblers plant in Mombasa, starting with 132 electric taxis and 20 electric matatus using completely knocked-down kits from China.
The company operates a lease-to-drive model for drivers and says charging a vehicle for a full day’s range costs around KES 400, compared to more than KES 2,000 in Petrol costs over the same distance.
That cost difference is exactly the kind of argument that makes EVs compelling in a high-fuel-price environment. The government, for its part, has been spending to keep fuel prices from climbing even higher.
About KES 5 billion from the Petroleum Development Levy stabilization mechanism has been deployed to moderate increases in Diesel and Kerosene prices, on top of the KES 28.19 billion the government says it has committed in total fuel stabilization and VAT relief measures.
READ: Fuel Shortage in Kenya Linked to Supply Chain Disruption
That spending has a ceiling, though, and with the subsidy fund already under strain, the pressure to find a longer-term solution is real.
Ruto has also promised that Diesel prices will drop by a further KES 10 per liter in the June-July fuel price review, which will offer some near-term relief, but that can only happen if the prices in the next EPRA review cycle don’t climb any further.
