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Kenya Set to Introduce New Tax on Electric Vehicle Sector

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Electric Vehicles
Electric Vehicles

The Kenyan government is poised to introduce new taxes on certain electric vehicles and their batteries, a move that experts caution could impede the growth of the country’s emerging e-mobility sector.

The proposed finance bill includes provisions for value-added tax (VAT) on electric bikes and buses, as well as solar and lithium-ion batteries. Additionally, an eco tax is slated to increase the price of a 60-kilogram solar battery in Kenya by $312 (45,000 Kenyan shillings), as reported by Nairobi-based Associated Battery Manufacturers (ABM).

Kenya has previously incentivized electric vehicle adoption through tax breaks, resulting in a significant surge in new electric vehicle registrations in 2023. However, industry insiders fear that the proposed taxes could hinder adoption and deter e-mobility companies from investing in Kenya.

Tom Courtright, research director at the Africa eMobility Alliance (AfEMA), views the proposed taxes as a negative signal that could undermine investor confidence in Kenya’s EV sector. He suggests that if the bill passes in its current form, interest from investors and international donors may wane.

Despite these concerns, Kenya drafted an e-mobility policy in April aimed at promoting local manufacturing and assembly of electric vehicles. The policy includes incentives for EV manufacturers and assemblers, as well as support for local battery manufacturing, recycling, and repurposing efforts.

President William Ruto has championed Kenya’s position as a hub for the EV sector in Africa, but the proposed tax changes appear to contradict this vision. Ruto has defended the tax hikes as necessary to address Kenya’s debt burden and fund development projects, despite widespread public frustration.

Industry stakeholders, including Guy Jack, CEO of Associated Battery Manufacturers, have described the new taxes as unsustainable and warned of their impact on jobs. Opposition to the bill is expected during the public participation stage before Parliament makes its decision.

Ultimately, the debate over the proposed taxes reflects broader challenges facing Kenya as it seeks to balance fiscal sustainability with the imperative to support emerging industries and achieve its green energy goals.

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