April 2024

Electrifying Kenya's
Transportation Sector
Fiscal Benefits and Policy Measures to Promote Electric Mobility
 Table of Contents

Definition of Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. Current State of Electric Mobility in Kenya. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.1 Electric Vehicle Landscape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Key Players in the E-mobility Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Electric Mobility Adoption Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Strategies for Driving the Shift from ICE vehicles to EVs . . . . . . . . . . . . . . . . . . . . . . 19

3. Policy Proposals to Promote EV Adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.1 Case Studies of Key African Nations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Kenya EV Policies & Policy Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Pathway Toward Local Value Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 Policy Justifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

4. Impact of Proposed Fiscal Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

4.1 Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2 Model Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.3 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.4 Quantification of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.5 Quantification of Costs & Tradeoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.6 Cost-Benefit Analysis of Proposed Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5. Conclusion & Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

6. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2
 Definition of Key Terms

Authorized Kenyan registered company that has an “Authorized Assembler”

Assembler license
2-wheeler Vehicle with two wheels, such as a motorcycle or bicycle

3-wheeler Vehicle with three wheels, such as rickshaws or tuk-tuks

4-wheeler Vehicle with four wheels, such as buses, and passenger cars
CAPEX Capital Expenditure
CKD Completely Knocked Down
EMAK Electric Mobility Association of Kenya
EVSE Electric Vehicle Supply Equipment
EV Electric Vehicle
FBU Fully Built Unit
HS code Global system used by customs to classify traded products
Hybrid vehicle A vehicle that uses both electric and ICE motors
ICE Internal Combustion Engine
KEBS Kenya Bureau of Standards
KPLC Kenya Power and Lighting Company
Licensed Kenyan registered company that has a manufacturing license
Manufacturer
MHCV Medium & Heavy Commercial Vehicle
NTSA National Transport and Safety Authority
OEM Original Equipment Manufacturer
OPEX Operating Expenses
SKD Semi-Knocked Down
TCO Total Cost of Ownership
VAT Value Added Tax

ELECTRIC 3
 Acknowledgments
In the development of this Electric Mobility Fiscal Policy White Paper, we have been fortunate to
receive generous support, insightful feedback, and invaluable contributions from a wide range
of individuals and organizations. Their collective expertise has been instrumental in shaping the
analysis, recommendations, and strategic direction outlined in this document.

We express our profound appreciation to the Government of Kenya, notably the Ministry
of Investments, Trade and Industry, the Ministry of Roads and Transport, the Energy and
Petroleum Regulatory Authority (EPRA), Kenya Power (KPLC), Kenya Revenue Authority, the
National Treasury and the E-Mobility Taskforce on the Development of National Electric Mobility
Policy, Strategy, Legislations and Regulations, among others, for their dedication to advancing
sustainable transportation and their consistent support for the e-mobility sector in Kenya.

We are deeply thankful to the various stakeholders within the electric vehicle (EV) ecosystem
in Kenya, including assemblers and manufacturers, design and engineering firms, importers,
financiers and service providers, and development organizations and consultants for sharing
their perspectives and experiences. Their insights into the challenges and opportunities
of EV adoption in Kenya have been invaluable in ensuring the relevance and applicability of
our recommendations. Particular thanks is owed to the Kenya Association of Manufacturers
(KAM), International Chamber of Commerce (ICC), Africa E-Mobility Alliance (AfEMA), Deutsche
Gesellschaft für Internationale Zusammenarbeit (GIZ) and Strathmore University for support
and collaboration on this policy paper.

Lastly, we thank the Governing Council and colleagues at the Electric Mobility Association of
Kenya (EMAK) for their dedication and hard work throughout this project to provide an accurate
and representative view of the industry and its needs. Their passion for electric mobility and
sustainable development has been a constant source of inspiration and motivation.

This white paper reflects a collaborative effort aimed at driving Kenya towards a greener,
more sustainable future through electric mobility solutions. We are grateful to everyone who
contributed their time, expertise, and resources to this endeavor. Together, we are paving the
way for a transformative shift in Kenya's transportation sector, one that promises economic
growth, job creation, reduction of fossil fuel dependency, environmental preservation, utilization
of locally produced power, and enhanced societal well-being.

4
 Executive Summary
Kenya, aligning with the Paris Agreement's climate objectives, has committed to a 32% reduction
in greenhouse gas (GHG) emissions by 2030, focusing significantly on the transport sector,
which accounts for 20% of national emissions. The sector's emissions rose by 4.6 million tonnes
between 2010 and 20191, highlighting the urgent need for sustainable alternatives. Electric
mobility (e-mobility) is identified as a key strategy to meet these goals, with the potential to cut
emissions by 600 thousand MtCO2e according to our analysis. Despite electric vehicles (EVs)
comprising less than 1% of the vehicle population in 2023, the industry grew rapidly in the last
year, receiving significant foreign direct investment, driven by local assembly, and supported by
significant government policy measures, including excise duty exemption for 2 and 3-wheelers
and zero-rated VAT across all EV categories (under the Finance Act of 2023), 10% import duty
for locally assembled EVs, and EPRA's approval of reduced e-mobility tariffs proposed by the
national utility, KPLC.

Fiscal benefits of supporting electric mobility

Figure 1: Net Fiscal Gain over five years with high support fiscal support from the Government of
Kenya (2023 - 2028)

This paper presents a compelling case for adopting fiscal policies supportive of e-mobility,
outlining the net fiscal impacts of low, moderate (status quo) and high support from policymakers.
The anticipated fiscal benefits accruing to the Government of Kenya (particularly from charging
revenue and foreign exchange savings) substantially exceed costs of government revenue loss
(notably from foregone VAT on petrol), with our model in a high-support scenario predicting

1 Ministry of Transport, Infrastructure, Housing, Urban Dev. & Public Works, “Transport Sector Climate Change Annual
Report”, 2019-2020

5
a net fiscal gain for the government of USD 333 million over five years. This underscores not
only the societal promise but the economic viability of transitioning towards electric mobility in
Kenya.

Societal Benefits of Supporting Electric Mobility

Additionally, the adoption of e-mobility in Kenya is poised to deliver significant environmental,
and societal advantages. Forecasted benefits include a potential reduction of 146 thousand
tonnes in CO2 emissions, and the creation of over 324,000 jobs in five years. These benefits
affirm the transition's economic and environmental justification for society and for the
Government of Kenya. This paper emphasizes the necessity of a comprehensive e-mobility
policy that supports both EV importation and local industry development, advocating for a
long-term national strategy to develop EV assembly and manufacturing, not simply a series of
short term budgetary measures.

Summary of Key Fiscal Policy Measures Proposed

Policy to support the critical electrification of transportation in Kenya requires a multi-faceted
policy approach, one that the e-Mobility Taskforce is admirably tackling in coordination with
multiple government and non-government stakeholders. This paper does not seek to address
all of the policy avenues to support this transition, but rather focuses more narrowly on detailed
fiscal incentives to support EVs and to support the Government of Kenya’s industrialization
agenda.

The table below provides a summary of proposed fiscal policy incentives for Fully Built Units
(FBUs), locally assembled units (CKDs), and fully localized manufacturing. The table reflects the
need to incentivise all approaches (including importation) in the early days of the industry to
encourage research and development and market adoption, but demonstrates the need for a
balanced and reasonably paced transition toward more local value creation as sector players,
supply chains, and the market matures. The policy recommendations in this table are outlined
in further detail in Section 3, and justifications and implications of the proposed policies are
outlined in Section 4.

6
Incentive Current Policies Imports of Licensed Assembly Licensed
Fully Built Units CKDs Manufacturers
(Starter) (Transitional) (End Goal)
Excise Duty Ranges from 0% Zero-rated (0%) Zero-rated (0%) for Zero-rated (0%) for
to 10% for various up to volume limits CKDs & EV components all EV categories and
categories of EVs set per category to for licensed assemblers EV raw materials
and components promote design, for a limited period of 5 and components
testing & piloting of years including Motors,
EV products - Controllers, Inverters,
- Zero-rated (0%) for all High Voltage
Beyond the volume Batteries & Chargers Parts, Batteries,
limits, standard taxes Chargers, & Charging
apply Infrastructure and
Battery Services. No
time limit.
Import Duty Ranges from 0% Zero-rated (0%) Zero-rated (0%) for Zero-rated (0%) for
to 35% for various up to volume limits CKDs & EV components all EV categories and
categories of EVs set per category to for licensed assemblers EV raw materials
and components; promote design, for a limited period of 5 and components
generally 10% testing & piloting of years including Motors,
for Authorized EV products. - Controllers, Inverters,
Assemblers - Zero-rated (0%) for all High Voltage
Beyond the volume Batteries & Chargers Parts, Batteries,
limits, standard taxes - Chargers, & Charging
apply Approve and implement Infrastructure and
LN 112 and LN 84 Battery Services. No
amended for EV industry time limit.
with 2-year grace period
for localization of parts
Value Ranges from 0% (i.e. Zero-rated (0%) Zero-rated (0%) for Zero-rated (0%) for
Added Tax FBU Vehicles & Solar within volume limits CKDs & EV components all EV categories and
(VAT) Batteries) to 16% set per category to for licensed assemblers EV raw materials
(i.e. most charging promote design, for a limited period of 5 and components
infrastructure and testing & piloting of years including Motors,
services) for various specific products - Controllers, Inverters,
categories of EVs - Zero-rated (0%) for all High Voltage
and components Beyond the volume EV Batteries, KPLC Parts, Batteries,
limits, standard taxes EV Tariff, Charging Chargers, & Charging
apply Infrastructure and Infrastructure and
Battery Services Battery Services. No
time limit.
Corporate 30% for all 30% for all 20% for Authorized 10% for Licensed
Tax categories categories Assemblers of EVs for a Manufacturers of EVs
limited period of 5 years for a limited period of
5 years
Volume NA E2W: 150 units None None
Threshold E3W: 150 units
(total
E4W (cars): No limit
units per
organization, E4W (bus): 20 units
from date of MHCV (heavy): No
registration) limit
EV Batteries: No limit
Time NA E2W: None 5 years None
Threshold E3W: None
E4W (cars): 5 years
E4W (bus): None
MHCV (heavy): 5
years
EV Batteries: None

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8
1. Introduction
Kenya has committed to ambitious targets for mitigating Greenhouse Gas (GHG)
emissions. Specifically, the nation aims to achieve a 32% reduction in overall GHG
emissions by 20302, with a particular emphasis on curbing energy-related emissions by
10%. The transport sector emerges as a pivotal focus, as it accounts for approximately
20% of the nation's total emissions. In 2019, the sector emitted 12.343 million tonnes
of CO2 equivalent (MtCO2e), reflecting a notable increase of 4.6 million tonnes since
2010. Among the contributing modes of transportation, road transport (the focus of this
paper) accounted for 12.09 MtCO2e (96%), while rail and aviation contributed 0.062
MtCO2e and 0.188 MtCO2e, respectively.

Figure 2. Transport sector emissions against Figure 3. Emissions share in the transport sector
overall emissions 2019

To meet its emissions reduction targets, the transport sector aspires to cut emissions by
3.46 MtCO2e by 2030, relative to a baseline of 21 MtCO2e3. From our analysis, and with high
fiscal support from the government, electric mobility emerges as a pivotal strategy, offering
the potential to reduce emissions by 600 thousand tons of CO2e, by 2028. These statistics
underscore the substantial contribution that electric vehicle (EV) accelerated adoption can
make to achieving emissions reduction and mitigation goals.

Despite the current prevalence of registered electric vehicles (EVs) representing less than
0.1% of the total vehicle population (4,047 out of 4.4 million as of 2023),4 the EV sector is
witnessing progressive growth, accelerating by over 500% in 2023. This growth in 2023 is not
surprising given the increase in government support that year. In a concerted effort to expedite
the widespread adoption of EVs, the government has implemented noteworthy measures.
For example, electric vehicles (EVs) classified under tariff numbers 8702.40.11, 8702.40.19,
8702.40.21, 8702.40.22, 8702.40.29, 8702.40.91, 8702.40.99, and 8703.80.00 now benefit
from reduced duties. (Previously, both electric and internal combustion engine vehicles were
subject to import duties of 25-35% and excise duties of 10%, licensed assemblers aside.)
Additionally, the Energy and Petroleum Regulatory Authority (EPRA) endorsed reduced tariffs
for e-mobility within the 2023-2025 Kenya Power rate structure5, set at a base rate of KES 16 for
peak and KES 8 per kWh for the off peak tariff. And in 2023, the Government of Kenya, through
the Finance Act of 2023, made EVs zero rated for VAT and excise duties, though as we discuss

2 United States Agency for International Development,” 2023 USAID Kenya Climate Change Country Profile”, November 2023
3 Ministry of Transport, Infrastructure, Housing, Urban Dev. & Public Works, “Transport Sector Climate Change Annual Report”, 2019-2020
4 National Transport & Safety Authority
5 https://www.epra.go.ke/services/economic-regulation/tarrif-setting/tarrif-setting-electricity/

9
below, VAT treatment of EVs and EV parts should be further clarified to enhance intended
impact on the sector and local jobs. These strategic policy initiatives align with phased-out fuel
subsidies, collectively fostering an environment conducive to sustainable e-mobility growth in
Kenya.

Beyond governmental initiatives, international collaborations and local entrepreneurial

endeavors within the EV sector have contributed significantly to its expansion. Over 20 new
electric buses and over 1,000 electric bicycles were put on the roads of Kenya in 2023, and in
Nairobi, where most of the growth has taken place, over 10% of new motorcycles sold in 2023
were electric. Electric mobility companies based in East Africa (most of them headquartered in
Kenya) have attracted over USD 120 million of debt and equity investment since January 2022.
While the baseline is low, this is extraordinary growth in the first year of significant fiscal support
of the EV industry. The Electric Mobility Association of Kenya presently has 44 registered
members from various sectors of the EV industry, including EV manufacturers, assemblers,
distributors, financiers, charging infrastructure companies, carbon credit firms, academia, parts
manufacturers, training firms, end users and servicing enterprises, exemplifying the multifaceted
growth within the sector.

Electric mobility is a climate

technology innovation with a positive
impact across people, planet, and
profit. With a goal of enhancing this
impact in a cost-effective way, this
paper aims to provide a thorough
evaluation of the current state of
electric mobility in Kenya, offering
valuable insights into its potential
for growth and the benefits it entails
for both Kenyan society and the
government’s fiscal health.

The focus of the paper is on the

economic argument for Electric
Vehicles (EVs), which includes
creating jobs, reducing fuel imports,
lowering costs for end-users, and enabling EV operators to earn more every day. The paper’s
objectives encompass outlining the existing EV landscape, highlighting the economic,
environmental, and social advantages of transitioning to electric mobility, tackling barriers
hindering EV adoption, and suggesting policy interventions to foster EV usage in Kenya.
Ultimately, this paper endeavors to serve as a comprehensive resource for stakeholders,
policymakers, and the public, equipping each with the necessary information to make informed
decisions and take actions that promote Kenya’s sustainable development.

10
2. Current State of Electric Mobility in
Kenya
2.1 Electric Vehicle Landscape
As of 2023, the electric vehicle (EV) market in Kenya is fast emerging, with a growing presence
of electric bicycles, motorbikes, tuk-tuks, passenger cars, buses, and specialized equipment
such as forklifts and tractors. This sector has experienced significant growth, with the number
of newly registered EVs skyrocketing from just 65 units in 2018 to 4047 units in 2023, making
up over 2.4% of all new vehicles sold in Kenya in 2023, according to NTSA data (including
e-bicycles, which are not registered).

Figure 4: New electric vehicle registration statistics (2018 - 2023)

Source: NTSA

Table 1. New electric vehicle registration statistics by vehicle classification (2018 - 2023)
Type of EV 2018 2019 2020 2021 2022 2023
Electric Bicycles6 321 1,353
Electric Motorcycles 44 96 28 144 366 2,557
Electric Tuk-Tuks 4 21 35 40 39
Electric Passenger Cars 12 15 31 62 36 45
Electric Buses & Mini Buses 3 18
Electric Other Vehicles 9 14 24 43 30 35

Total EVs Registered 65 129 104 284 796 4,047

Source: NTSA

6 Bicycle figures obtained from interviewed electric bicycles companies, while all other EV data is from NTSA

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Table 2. New all vehicle registration statistics by vehicle classification (2018 - 2023)

Type of Vehicle 2018 2019 2020 2021 2022 2023

Total Bicycles (Not Registered)
Total Motorcycles 188,883 209,740 238,802 294,585 188,036 76,343
Total Tuk-Tuks 6,258 7,339 5,905 6,343 6,083 5,923
Total Passenger Cars 81,641 90,387 74,177 81,282 69,914 64,516
Total Buses & Mini Buses 3,560 5,000 2,757 2,878 2,839 2,576
Total Other Vehicles 16,676 16,085 18,172 22,374 18,137 16,555
Total Vehicles Registered 297,018 328,551 339,813 407,462 285,009 165,913
Source: NTSA

Table 3. New electric vehicle registrations as a fraction of new all vehicle registrations (2018 - 2023)

Type of Vehicle EV Share (2018 - 2022) EV Share (2023)

Electric Bicycles (%) 7
0.06% 0.24%
Electric Motorcycles (%) 0.06% 3.35%
Electric Tuk-Tuks (%) 0.31% 0.66%
Electric Passenger Cars (%) 0.04% 0.07%
Electric Buses & Mini Buses (%) 0.02% 0.70%
Other Vehicles (%) 0.13% 0.21%
Total EVs Registered (%) 0.08% 2.44%
Source: Own analysis from NTSA data

The National Energy Efficiency and Conservation Strategy (2020) is aiming for 5% of all newly
registered vehicles in Kenya to be electric-powered by 2025. As indicated in table 2 above, the
current adoption rate remains relatively low, but is increasing quickly, strong evidence that the
fiscal incentives put in place in 2023, albeit temporary, provided a significant stimulus to the
market. While from 2018 to 2022, EVs made up less than 0.1% of new vehicle registrations, in
2023 EV registrations grew rapidly to make up over 2.4% of all new vehicle sales (or 1.6% if
we exclude e-bicycles, which are not registered with NTSA). Annual electric bicycle sales grew
from 0 to 1,353 in just two years, and buses similarly grew from 0 to 18 over the same period.
And the fastest growing and largest EV sub-sector, electric motorcycles, made up over 3.3%
of all new motorcycle registrations in 2023, and over 10% of the market in Nairobi, where most
sales were concentrated due to the careful roll-out of charging, battery swapping and service
stations. This shows that with continued budgetary support, it is achievable not only to meet
up surpass the targets set by the National Energy Efficiency and Conservation Strategy, and
for Kenya to become not only a continent leader but a world leader in electric vehicle adoption,
supported in large part by local assembly and manufacturing. To meet this target, it is evident
that substantial and sustained fiscal and non-fiscal incentives must be implemented.

To meet the target of having 5% of newly registered vehicles as electric vehicles (EVs) by 2025,
an estimated 15,000 EVs need to be registered that year (assuming 300,000 vehicle sales in
2025), a significant increase from the 4,047 registered in 2023. This paper investigates how
fiscal policy affects EV registrations and discusses the economic and societal advantages of
implementing enhanced fiscal incentives.

7 Electric bicycles are stated as a percentage of estimated total bicycles, as bicycles are not registered at NTSA

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2.2 Key Players in the E-mobility Industry
In the electric mobility landscape, various entities play pivotal roles in driving progress, shaping
policies, and contributing to the overall growth of the industry. This section provides an overview
of the primary stakeholders influencing the electric mobility sector, both private and public,
domestic and international.

A non-exhaustive list of some of the largest sector players is found in Table 4 below, followed
by descriptions of some of the largest categories of stakeholders.

Table 4. Key private sector companies in the e-mobility industry in Kenya

e-Motor e-3W e-4W Research
Company e-Bicycle Charging Financing
cycle (TukTuks) (car+bus) / Training
Advance Mobility ●
Ampersand E-Mobility Ltd ● ●
ARC Ride Kenya Limited ● ● ● ●
BasiGo Kenya ● ●
BEV Ltd ● ● ●
Car & General (Trading) Lim-
ited ● ● ● ●
ChajaWork AFRICA Limited ●
Drive Electric / Knights Energy ● ●
eBee Mobility Kenya Limited ● ● ●
Ecobodaa Company ● ●
Equator Mobility ● ● ●
EVChaja Ltd ● ●
Evon Green Energy Limited ●
eWAKA Mobility ● ● ●
Exodus Mobility ●
FIKA Mobility ●
Frontier Links ● ●
Gecss Investment Ltd ●
Go-Electric Limited ● ● ● ●
Hyundai ● ●
Kiri EV Limited ● ●
Mazi Mobility ● ●
M-KOPA Kenya Ltd ● ● ●
MOGO Financing Kenya ●
Motion Energy Group Pty Ltd ●
Power Governors Ltd ●
Powerhive Kenya ● ●
Roam Electric Ltd ● ● ●
Rockland Energy ●
Spiro ● ●
STIMA Mobility Ltd ● ● ●
Sun King ●
TES Transitions Ltd ● ●
Transboda Ltd ●
Watu Credit Ltd ●
Wuxi Tech ltd. ●
Yna Kenya ● ● ● ●

13
Government and Regulatory Bodies
Government bodies such as the Ministry of Transport and Infrastructure, Ministry of Treasury
and Finance, Ministry of Environment, Ministry of Health, Ministry of Trade and Industry, Ministry
of Energy, Ministry of Housing and Urban Development, and Public Works, alongside regulatory
agencies like the Energy and Petroleum Regulatory Authority (EPRA) play a central role in shaping
the electric mobility landscape. The sole electric utility, KPLC, plays an invariably critical role
in the industry. Policymakers and regulators enact legislation, incentives, and standards that
significantly influence the adoption and development of electric vehicles (EVs).

Assemblers, Manufacturers & Distributors

While the EV market is still young, we have many emerging players in the industry who
manufacture and assemble electric vehicles and batteries locally. Some of the largest companies
in the Kenyan EV sector include Roam, Ampersand, ArcRide, Fika Mobility, eWaka, KiriEV, Fika
Mobility Powerhive and Spiro (motorcycles), Autopax, Knights Energy, Caetano, and (soon)
BYD (passenger cars), eBee Africa and ArcRide (electric bicycles), and Roam and BasiGo
(buses), among many others. Notably, many of these players extend their services beyond
manufacturing, providing battery charging and swapping solutions. While our emphasis in this
paper centers on Lithium-ion batteries, it is essential to acknowledge the rapid advancements
in alternative technologies, including other fuel sources such as hydrogen, which are gaining
momentum globally, but are not yet commercially present in the Kenyan transportation sector.

Charging Infrastructure Providers

In Kenya, charging infrastructure providers such as EVChaja, Roam, BasiGo and Knights Energy,
have been actively involved in establishing electric vehicle charging stations, playing a critical role
in influencing the adoption of electric vehicles. Kenya currently has at least 17 EV car charging
points installed across the country, and over a hundred 2-wheeler charging or swapping units,
with most of these still concentrated in Nairobi. These providers contribute to the development
of a reliable and widespread battery charging (or in some cases swapping) network, addressing
customer range anxiety and promoting the widespread use of EVs. The charging infrastructure
needs of various sub sectors differ greatly, from simple AC charging for e-bicycles and 2 and 3
Wheeler EV’s to large DC 60-180 kW charging bus terminuses for electric buses. Recognizing
the challenges and opportunities within each sub-sector is key to implementing fiscal benefits
that stimulate the expansion of charging infrastructure, making electric mobility more accessible
across the country. For example, there are challenges related to the capital costs of setting up
charging infrastructure (CI) and the current low density of charging networks. Additionally, there
is currently no permitting process in place for the installation of public chargers, which could be
a hindrance at the county level. In terms of opportunities, players in the industry are exploring
innovative solutions such as home-charging and portable swapping locations to address the
challenges related to charging infrastructure.

Industry Associations and Advocacy

Groups
Industry associations and advocacy groups
like the Electric Mobility Association of Kenya
(EMAK), Kenya Association of Manufacturers
(KAM), International Chamber of Commerce
(ICC) and Africa E-Mobility Alliance (AfEMA)
play a crucial role in representing the collective
interests of entities operating in the electric
mobility sector in Kenya. These organizations

14
work towards fostering collaboration, disseminating knowledge, and advocating for policies
that support sustainable transportation. Aligning fiscal benefits with the objectives and
recommendations of these groups, including promoting local electric mobility manufacturing
and supporting charging infrastructure development, can enhance the effectiveness of policies
tailored to Kenya's context, and ensure that policy reflects the best interests of all stakeholders.
These advocacy groups are supported by members and donor organizations.

Financing Companies
In Kenya, the majority of vehicle purchases,
especially motorcycles and buses, are financed.
Key players in the consumer credit market for
electric vehicles include banks (such as NCBA,
KCB, and Equity), SACCOs, microfinance
institutions, and asset finance companies (such
as Hakki, M-KOPA, Mogo, and Watu Credit).
These institutions offer various financial models
to address the high upfront investment and cost
of capital, including Pay-As-You-Go (PayGO),
PayCharge, and lease rentals. While they approach
the market with a wide array of models, each play
a pivotal role by providing loans, and financing
opportunities to facilitate the adoption of electric
vehicles, many of them for consumers without
significant credit histories. Crafting policies to
incentivize these financing companies to support
electric mobility initiatives can catalyze significant
investment into the sector, promoting growth and
sustainability.

Development Partners and Donor

Organizations
International collaboration plays a crucial role in addressing challenges related to electric
mobility adoption in Kenya. Partnerships with organizations like the Deutsche Gesellschaft
für Internationale Zusammenarbeit (GIZ), International Finance Corporation (IFC), Foreign
Commonwealth and Development Office (FCDO), Shell Foundation, USAID, World Resources
Institute (WRI Africa), and the United Nations Environment Programme (UNEP) bring resources,
funding, expertise, and support to enhance Kenya's electric mobility ecosystem. These
collaborations require strong government support and goodwill to ensure continued investment
in e-mobility, which in turn builds confidence in the sector both domestically and internationally.

Academia
Academic institutions, including TVETs, universities, and research institutions, play a pivotal role
in Kenya's e-mobility industry by supporting the movement through various means. Institutions
like Strathmore University are at the forefront, offering specialized courses, conducting research,
and providing expertise to advance e-mobility technologies. These institutions train a skilled
workforce, conduct R&D on battery efficiency and sustainable transportation, and collaborate
with industry and government to develop innovative solutions. Their contributions are crucial in
driving the adoption of e-mobility in Kenya, measuring impacts of EV deployment, and shaping
its future as a sustainable mode of transportation.

15
2.3 Electric Mobility Adoption Barriers
Electric vehicle (EV) adoption in Kenya faces various barriers that hinder its widespread
acceptance. These barriers can be broadly categorized into economic, convenience,
and reliability factors, and they significantly impact consumer behavior and market
dynamics. Here, we delve into these challenges and provide insights into the key
barriers faced in Kenya's EV landscape, which can be addressed through policy:

Policy Barriers
• Incentive Programs: The absence of stable, long-term government incentives and
subsidies for EVs hampers adoption. Introducing tax incentives, rebates, and subsidies
(beyond one-year budgetary measures) can create a more favorable environment for
potential buyers.

• Comprehensive E-Mobility Strategy: Kenya's lack heretofore of a comprehensive

e-mobility strategy and clear implementing bodies leads to fragmented efforts and
short-term opportunistic policies. Establishing a unified strategy, clearly defined
roles, and a collaborative approach among stakeholders can streamline efforts and
promote sector growth.

• Regulatory Framework for Charging Infrastructure: The absence of clear

and comprehensive regulations for the establishment and operation of charging
infrastructure poses a challenge, as does unclear policy regarding allocation of land
for such endeavors. Policies should be developed to streamline the licensing, safety,
and technical and real estate management standards for charging stations, promoting
their widespread deployment.

• Regulatory Framework around Carbon Credits. EVs can have a significant impact
on CO2 reduction, and monetizing carbon credits through a compliance based
marketplace can have a very material impact on unit economics which can drive
down the costs of acquiring and managing EVs. A sustainable, long term approach to
taxation of carbon credits is equally important.

• Absence of Circular Economy Policies: Like most industries, the electric vehicle
industry generates various waste streams, including end-of-life batteries. The lack of
policies and regulations promoting a circular economy, including recycling and proper
disposal of EV components, poses environmental and sustainability challenges.
Policies should encourage responsible end-of-life management for EV components.

• Financial Barriers for Consumers: The absence of stable, long-term financial

incentives for consumers, such as subsidies or tax breaks or low-interest loans,
hinders widespread EV adoption. Developing policies that provide direct financial
benefits to consumers, coupled with awareness campaigns, can address economic
barriers and drive consumer interest in EVs.

Quality & Standards Barriers

• Safety and Certification Requirements: Safety and Certification Requirements: The
Kenya Bureau of Standards (KEBS) has introduced 24 safety standards for electric
vehicles (EVs), derived from existing ISO standards. However, there is a growing
need for additional, more detailed standards to effectively operationalize EVs. These
standards should focus on areas such as charging safety without overly restricting
technology choices. Specific aspects that could be addressed include connector
standards, communication protocols, interoperability within the industry, and other
crucial operational elements.

16
 • HS Code Standards: Harmonized System (HS) codes are essential for proper
classification and regulation of goods in international trade. The absence or inadequacy
of HS Code standards specific to EVs and EV parts can lead to ambiguity in customs
procedures, hindering importation, exportation, and local assembly and manufacturing
of Electric Vehicles and related components. Incentives and exemptions should be
considered both on the EVs and EV parts, consequently benefiting the EV products
assembled locally.

Economic Barriers
• High Initial Cost: The upfront purchase price of EVs is generally higher compared to
traditional internal combustion engine (ICE) vehicles. (The vehicle itself is typically the
same price as an ICE vehicle, but batteries typically cost an additional 35-50% on top
of the vehicle cost. This higher upfront cost of the battery can deter price-sensitive
consumers, despite the long-term cost savings associated with EVs. Fortunately,
customer financing options and battery leasing programs are available which are able
to smooth out this initial CAPEX. Nevertheless, reducing product cost is critical to
increasing adoption rates

• Import Duties and Excise Duties: Despite recent VAT reductions, high import duties
(10-35%, particularly on components purchased by local assemblers) and 10% excise
duties impact EV prices to the end consumer, cutlaining adoption. Collaborating
with the government to reassess duties on EVs and aligning them with the country's
sustainability goals can make EVs more accessible.

Infrastructure Barriers
• Limited Charging Infrastructure: The availability of charging stations remains
limited, particularly in rural areas. This lack of charging infrastructure raises concerns
about range anxiety and the convenience of recharging.

17
 • Infrastructure Adaptation: Adapting roads and building infrastructure to
accommodate EVs and charging stations is essential. Revision of policies regarding
road infrastructure to address specific challenges faced by EVs, such as lower ground
clearances, will be instrumental as EV adoption increases.

• Home Charging: Urban planners, architects, developers, policymakers, and utility

companies should collaborate to integrate home charging stations into residential
building designs, potentially mandating their inclusion in the National building codes
on a fraction of the parking spaces provided. Doing this with the highest safety
standards is of critical importance.

• Investment in the Electrical Grid: Investment in the national grid is crucial for ensuring
renewability, accessibility, and stability. Kenya Power's investment in extending and
metering the grid up to charging stations is critical for supporting the infrastructure
needed for EV adoption.

• NMT Infrastructure: Kenya's EV adoption faces challenges due to inadequate Non-

Motorized Transport (NMT) infrastructure, like cycling lanes. The lack of dedicated
lanes makes cycling unsafe, discouraging its use. Improved NMT infrastructure,
including separated cycling lanes, is essential to encourage cycling, complementing
EV adoption and reducing carbon emissions.

• EV Parking: In many markets, EVs have preferential parking spaces. In Kenya, limited
EV parking facilities, especially bicycle racks at public buildings, hinder EV adoption in
Kenya. The lack of secure and convenient parking spaces makes using bicycles and
EVs for commuting difficult. More bicycle and EV parking, especially in urban areas
and near public buildings, can incentivize cycling and EVs over traditional vehicles,
promoting a sustainable transportation system.

Reliability Barriers
• Intermittent Power Supply:
Unreliable power supply in
certain regions of Kenya
raises doubts about the
availability of electricity for
charging. Implementing grid
improvements, exploring
renewable energy sources
for charging stations, and
employing energy storage
solutions can enhance the
reliability of power supply.

• Maintenance and Repairs:

Lack of specialized maintenance and repairs centers for EVs in some areas create
a barrier to proliferation of EVs. Investing in training programs for local technicians,
encouraging partnerships with global EV service providers, and establishing regional
service hubs can address concerns about service accessibility and reliability.

Market Barriers
• Lack of Awareness: Many consumers lack information about the benefits of
electric vehicles. A targeted awareness campaign, involving collaboration between
government agencies, manufacturers, distributors, media, academia, influencer

18
 community and advocacy groups, can dispel myths and educate the public about
the advantages of EVs. Of particular importance is informing customers about battery
lifecycle management, including safe battery handling, battery care to optimize
longevity and performance, end end of life options.

• Lack of Skill Sets: Training programs to develop the necessary skills for EV
maintenance and repair and safety are essential. Investing in education and vocational
training can ensure that mechanics, electricians, technicians and first responders are
equipped to service EVs reliably and safely, thereby increasing reliable service options
and enhancing consumer confidence in the technology.

2.4 Strategies for Driving the Shift from ICE vehicles to EVs
• Adoption incentives: Incentives and subsidies from governments to end users and
purchasers of vehicles, such as tax credits and rebates, help reduce the upfront cost of
buying electric vehicles (EVs), making them more financially attractive than traditional
internal combustion engine (ICE) vehicles. Governments can further drive EV uptake
by incentivizing large, capital-backed industries like e-commerce and security to
adopt EVs downstream, encouraging the installation of charging infrastructure and
the leasing of electric vehicles. This approach can hasten EV adoption, particularly in
sectors where the switch to electric vehicles can offer substantial advantages.

• Charging infrastructure: Investing in EV charging infrastructure is crucial for

widespread adoption. Governments and private sectors should collaborate to
establish a comprehensive network of charging stations, including fast chargers
along highways, urban areas, workplaces, and residential areas.

• Cycling infrastructure: Investing in cycling infrastructure is a key measure for

facilitating the switch to electric vehicle (EV) adoption. By improving infrastructure
for cyclists, such as dedicated bike lanes, secure parking facilities, and bike-sharing
programs, cities can encourage more people to choose cycling as a sustainable
mode of transportation.

• Regulatory policies: Implementing regulations and mandates can accelerate the

adoption of EVs. This includes setting higher emission standards, fuel economy
regulations, and safety standards. Additionally, introducing low-emission zones or
congestion pricing can incentivize clean vehicles.

• Education and awareness: Increasing public awareness about the benefits of

EVs, such as lower operating costs, reduced emissions, and improved air quality, is
essential. Education campaigns can dispel myths about EVs, address range anxiety
concerns, and highlight available incentives.

19
• Fleet electrification: Encouraging the electrification of public and private vehicle
fleets can drive significant EV adoption. Governments and businesses can lead by
example by transitioning their own fleets to EVs, which can create economies of scale
and demonstrate the feasibility of EV technology.

• Financial and technical support: Providing financial assistance and technical

support to auto manufacturers, suppliers, and startups can spur innovation in EV
technology and reduce manufacturing costs. This can include research grants, loans,
and partnerships for battery development and production.

20
3. Policy Proposals to Promote EV
Adoption
The Government of Kenya has been at the forefront of enhancing EV adoption in the Country,
particularly in 2023. These policies have already shown promise in stimulating the industry,
but we must do more to ensure this change is sustained. In this chapter, we look at proposed
policy measures aimed at promoting electric vehicle (EV) adoption. We not only analyze existing
policies that have set the stage for EV growth but also make proposals designed to accelerate
this transition and correct for some of the unintended or sub-optimal consequences of policies
that are currently in place. By examining a blend of established regulations and potential new
strategies, this chapter provides an outlook on how policy can shape the future of EVs.

3.1 Case Studies of Key African Nations

To begin with, we explore the strategies and approaches adopted by a few other African
countries: Rwanda, South Africa, Ethiopia, in embracing electric vehicle (EV) technology. We
look at investments made by these nations to foster EV adoption, highlighting their efforts to
reduce acquisition and operational costs of EVs. Kenya is already well-placed to build upon
much of the policy progress of the last few years, but these examples provide an opportunity
for Kenya to see what more it can do to establish itself as the true leader in the African electric
vehicle market.

Rwanda

Fiscal incentives Non-fiscal incentives

Electricity Tariffs: Capped at industrial tariff levels,
with reduced tariffs during off-peak times. Charge point Government Land: Rent-free provision for charging
operators will be billed at close to USD 10 cents/kWh stations on government land
instead of close to USD 20 cents/kWh
VAT: Electric vehicles, their spare parts, batteries, and Dedicated Bus Lanes: Access for EVs to high-
charging station equipment are zero-rated for VAT occupancy vehicle lanes
Excise Duty: Exemption from excise duty for electric
Charging Station: Mandatory inclusion in building
vehicles, spare parts, batteries, charging stations, and
code and city planning
equipment
Import Duty: Exemption from import duty for electric
Parking Fees: Preferential treatment including free
vehicles and related equipment such as spare parts and
parking in congested zones
batteries
Withholding Tax: Exemption from withholding tax at
Operator License: Free license and authorization for
customs for electric vehicles and related items such as
commercial electric vehicles
spare parts and batteries
Corporate Tax: A reduced rate of 15% for companies Vehicle Categorization: Plug-in hybrids and hybrids
manufacturing or assembling electric vehicles in Rwanda are considered as EVs

21
South Africa

Fiscal incentives Non-fiscal incentives

R&D Tax Incentive: Deduct 150% of R&D spending from Manufacturing Support: Collaboration with
taxable income. government departments and authorities for
targets in EV uptake in government vehicle
fleets.
Import Duties: Temporary reduction on import duties for EV Uptake and Sales Support: Incentives
batteries in vehicles. for producers to manufacture and sell
affordable EVs.
Cash Grants: 20% cash grant to Original Equipment Workforce Upskilling: Reinvestment and
Manufacturers (OEMs); 25% to component manufacturers; 30% support for reskilling and upskilling the
for qualifying investments in new energy vehicle manufacturing, workforce in EV design, engineering, and
based on the cash needed for the specific investment project manufacturing through the development of
an EV certification program in collaboration
with industry for skills development, which
indicates a commitment to workforce
development in the EV sector​​.
Duty Credit (Production Rebate Certificate): 20% duty credit EV Manufacturing Support: Incentives
on the value of EV batteries manufactured locally and used in geared to encourage existing producers to
the assembly of electric vehicles​​. shift to EV manufacturing, which include
leveraging R&D tax incentives to deepen
domestic value addition
Environmental Levy: On carbon dioxide emissions of motor End Users / Fleets: Consumer incentives
vehicles (120 Rand per g/km CO2 emissions exceeding 95g/km for the adoption of EVs and implementation
and 160 Rand per g/km CO² emissions exceeding 175g/km for of a framework for fleets to transition to
commercial vehicles). SA-produced new energy vehicles are
under consideration, which could indirectly
incentivize producers by creating demand​​.
Carbon Fuel Levy: A levy charged between 10 Rand cents per
liter for petrol and 11 Rand cents for diesel.

Ethiopia

Fiscal incentives Non-fiscal incentives

VAT: Electric vehicles are exempted from Value Added Charging Station Facilities: The government
Tax. This reduces the overall purchase cost for consumers is investing in the development of EV charging
interested in acquiring EVs, making them more financially infrastructure across the country. This includes
appealing compared to traditional vehicles. installing charging stations in urban centers and
along highways.
Excise Tax & Surtax: Electric vehicles are also exempt Incentives for Electric Public Transportation:
from excise tax and surtax. This waiver further contributes The government is incentivizing the adoption
to the affordability of EVs by eliminating additional taxes of electric public transportation vehicles.
that would otherwise increase their purchase price This includes subsidies and support for the
electrification of public transport fleets, such as
buses and taxis, to reduce emissions and improve
air quality in urban areas.
Customs Tax: The customs tax rate has been significantly Public Awareness Campaigns: Various initiatives
reduced to incentivize EV adoption. Fully assembled EVs and campaigns are conducted to educate
now incur a customs tax of 15%, while semi-assembled consumers on the environmental, economic, and
vehicles face a lower rate of 5%. social advantages of EVs, as well as dispel myths
and misconceptions.

22
3.2 Kenya EV Policies & Policy Proposals
Now that we have understood the state of the industry and observed some representative policies
in place in other countries, we turn our attention to what policy measures are most appropriate
to accelerate EV adoption in Kenya. In this section, we delve into the existing policies related to
the electric vehicle (EV) industry in Kenya and provide proposals for adjustments to make these
policies more clear and effective. We advocate for policy formalization, we encourage stability
and continuity over the next five years, and we seek clarification and rationalization of policies
where feasible.

Fiscal policies in 2023 served an important role in accelerating commercialization of EVs in

Kenya. However, the current policies are in place for one year only, and are a blanket incentive
that as designed incentivizes importation of foreign products more than local production. These
policies must be formalized and adjusted to give the industry and consumers longer term clarity,
which will encourage more sustained investment in the sector. Policymakers should consider
clear timelines (beyond just one year) for the fiscal incentives considered, and should consider
how policies create incentives for a transition from importation toward local manufacturing. The
table and paragraphs below outline what the EV industry seeks for 2024 and beyond:

Context, Details &

EV Category HS Code Tax or Duty Current Proposed
Justification
2-Wheeler EVs
Electric Bicycles 87116010 Excise Duty 0% (Zero- 0% (Zero- Currently the HS code for
(FBU) Rated) Rated) standard bicycles is being
used within the EAC to
Import Duty 10% under 10% apply taxes to e-bicycles,
HS though an HS code for
87120000 e-bicycles exists globally:
HS 87116010. We suggest
VAT 0% (Zero 0% up to clarifying the use of this
Rated) under 150; correct HS code going
87120000 Thereafter forward, to avoid unequal
16% application of the law or
confusion.
Corporate Tax 30% 30%
-
In any case, we suggest
limiting the VAT zero
rating for FBU e-bicycles
to 150 units, after which
companies will pay full VAT,
as many companies already
assemble locally.
Electric Bicycles 87116010 Excise Duty 0% (Zero- 0% (Zero E-bicycles are a promising
(CKD / Rated) Rated) potential means of rural
Assembly) Various, if transport and youth
parts are Import Duty 0% for elec- 0% (stay of employment; these are
brought in 0%) already being assembled
trical
separately locally. Proposed zero
10% for
rating for 5 year period.
mechanical
-
VAT 0% (Zero 0% (Zero As per above, HS codes
Rated) Rated) specific for electric bicycles
should be clarified in the
policy framework (HS
Corporate Tax 30% 20% for 5
87116010 for CKDs)
years
-
Assembler License should
be required in order to
receive tax benefits for
assembly (without bonded
warehouse requirement)

23
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
Electric Bicycles 85013100 Excise Duty 0% (Zero- 0% (Zero Motors and controllers
(Motors & 90328900 Rated) Rated) are the most important
Controllers) and expensive parts of an
Import Duty 0% for elec- 0% (stay of electric bicycles (in addition
0%) to batteries, which are
trical
covered separately below).
10% for
These should be called out
mechanical
specifically in the tax code
VAT 0% (Zero 0% (Zero in order to incentivize local
Rated) Rated) assembly and quality after
sales service.
-
Corporate Tax 30% 20% for 5
Assembler License should
years
not be required to receive
tax benefits on these HS
codes, as these are also
used for spare parts.
Electric Bicycles 87116010 Excise Duty 0% (Zero- 0% (Zero Manufacturing of electric
(Manufacturing) Rated) Rated) bicycles is entirely feasible
Various, if at scale in Kenya, and
parts are Import Duty 0% for elec- 0% (stay of targeted incentives can
brought in 0%) help to overcome generally
trical
separately higher cost of locally made
10% for
parts.
mechanical
-
VAT 0% (Zero 0% (Zero As per above, HS codes
Rated) Rated) specific for electric bicycles
should be clarified in the
policy framework (HS
Corporate Tax 30% 10% for 5
87116010 for CKDs)
years
-
Manufacturer License
should be required in order
to receive these unlimited
tax benefits
2 Wheeler EV 87116000 Excise Duty 0% (Ze- 0% (Ze- Fully Built Units create only
Motorcycles (typical ro-Rated) ro-Rated) 5% of jobs compared to
(FBU) code within manufacturing, and current
EAC) Import Duty 25% 10% tax policy over-incentivizes
FBUs.
87116050 -
87116090 We propose a volume
VAT 0% (Zero 0% up to
Rated) 150; threshold of a maximum of
Thereafter 150 FBUs per organization
16% for zero rating on VAT, after
which companies must
Corporate Tax 30% 30% assemble local to get zero
rating.
-
Other HS Codes, used
globally for e-motorcycles,
can also be used in the EAC

24
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
2 Wheeler EV 87116000 Excise Duty 0% (Ze- 0% (Zero Local assembly creates 6x
Motorcycles ro-Rated) Rated) more jobs than importation
(CKD / Various, if of FBUs and thus should be
Assembly) parts are Import Duty 10% for 0% (stay of encouraged with zero rated
brought in VAT for 5 years.
CKDs; 0%)
separately 10-25% for -
parts Assembler License should
be required in order to
VAT 0% (Ze- 0% (Zero receive tax benefits for
ro-Rated) Rated) assembly (without bonded
warehouse requirement)
Corporate Tax 30% 20% for 5 -
years It is critical that CKD tax
treatment applies equally
in cases when approved
assemblers import
components in separate
containers.
2 Wheeler EV 85013100 Excise Duty 0% 0% (Zero EV motors (HS 85013100)
Motorcycle 90328900 Rated) and Controllers (HS
(Motors) 90328900) are, for the
(inc motors fixed Import Duty 0% 0% (stay of time being, difficult to
onto hubs or not) manufacture locally.
0%)
(Controllers) Specific policies clarifying
(inc components tax policy on this key
VAT 16% 0% (Zero component will support the
and various raw
Rated) growth of the industry and
mechanical and
electrical parts) encourage development
Corporate Tax 30% 20% for 5 of a local manufacturing
years industry over time.
-
Assembler License should
not be required to receive
tax benefits on these HS
codes, as these are also
used for spare parts.
2 Wheeler EV 87116000 Excise Duty 0% 0% (Zero Companies that have
Motorcycle Rated) sufficiently localized their
(Manufacturing) Various, if supply chains to gain a
parts are Import Duty 0% 0% (stay of Manufacturer License
brought in 0%) should be granted more
separately permanent fiscal benefits,
as manufacturing creates
VAT 16% 0% (Zero 20x the jobs of imports and
Rated) over 4x the jobs of local
assembly.
Corporate Tax 30% 10% for 5 -
years Some local EV assembly
companies have already
endeavored on this route,
and it is critical that policy
incentivizes them to
continue their localization
efforts.
3-Wheeler EVs

25
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
3 Wheeler EV 87038010 Excise Duty 10% 0% (Zero- FBUs are an entry point
Motorcycles 87038090 Rated) for new players as they
(Tuk Tuks & Pas- build capacity and develop
senger) Import Duty 35% 10% the market. However,
(FBU) as for 2-wheelers, we
recommend a limit of
150 units per company
VAT 16% 0% up to to incentivize transition
150; toward local assembly
Thereafter and manufacturing, even
16% though currently 3-wheeler
Corporate Tax 30% 30% assembly in Kenya is
limited.
-
Policy should distinguish
between HS codes for 3
wheeler EVs vs passenger
car EVs. Currently HS
codes are shared.
3 Wheeler EV 87038010 Excise Duty 0% (Zero- 0% (Zero We propose policies
Motorcycles Rated) Rated) intended to support local
(Tuk Tuks & Pas- Various, if assembly of 3 wheelers by
senger) parts are Import Duty 10% for 0% (stay of established assemblers,
(CKD / Assem- brought in CKDs; 0%) per a framework place for
bly) separately 10-25% for motorcycles, similarly for 5
parts years.
-
VAT 0% (Zero- 0% (Zero Assembler License should
Rated) Rated) be required in order to
receive tax benefits for
Corporate Tax 30% 20% for 5 assembly (without bonded
years warehouse requirement)
-
As with motorcycles,
CKD tax treatment should
apply equally whether
components are imported
together or separately.
3 Wheeler EV 87038010 Excise Duty 0% 0% (Zero Manufacturing creates 20x
Motorcycles Rated) the jobs of imports and over
(Tuk Tuks & Pas- Various, if 4x the jobs of local assem-
senger) parts are Import Duty 0% 0% (stay of bly, and must be encour-
(Manufacturing) brought in 0%) aged
separately -
Manufacturing of electric
VAT 16% 0% (Zero
tuk tuks is not happen-
Rated)
ing currently in Kenya but
is feasible, and targeted
Corporate Tax 30% 10% for 5 incentives can help to over-
years come higher cost of locally
made parts.
-
Manufacturer License
should be required in order
to receive these unlimited
tax benefits
4-Wheeler & Large Commercial EVs

26
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
4 Wheeler EV 87038000 Excise Duty 10% 0% (Ze- Aggressive policies are
Passenger Cars 87038010 ro-Rated) necessary for 4-wheeler
(FBU) 87038090 passenger cars, as devel-
(full electric) Import Duty 35% 10% oping a local passenger car
industry requires additional
87035000 long-term government
87036000 support.
VAT 16% 0% with no
87037000 -
limit
(plug-in Thus, we suggest blan-
hybrids) ket VAT incentives for this
Corporate Tax 30% 30% sub-sector, both for FBU
imports as well as locally
assembled vehicles and
parts. We suggest the same
policy for fully electric cars
and plug-in hybrid cars
(which serve as important
transition options)
4 Wheeler EV 87038000 Excise Duty 0% (Ze- 0% (Zero Kenya does have a local as-
Passenger Cars 87038010 ro-Rated) Rated) sembly industry for passen-
(CKD / 87038090 ger cars, but currently few
Assembly) (full electric) Import Duty 10% for 0% (stay of assemblers - or the foreign
CKDs; 0%) OEMs - have made steps
87035000 10-25% for toward setting up assem-
87036000 parts bly of EVs locally. 5-year
87037000 favorable tax incentives
(plug-in VAT 0% (Ze- 0% (Zero are critical to stimulate this
hybrids) ro-Rated) Rated) sub-sector.
-
Corporate Tax 30% 20% for 5 Assembler License should
years be required in order to
receive tax benefits for
assembly (without bonded
warehouse requirement)
4 Wheeler EV 87038000 Excise Duty 0% 0% (Zero Manufacturing creates 20x
Passenger Cars 87038010 Rated) the jobs of imports and over
(Manufacturing) 87038090 4x the jobs of local assem-
(full electric) Import Duty 0% 0% (stay of bly, and must be encour-
0%) aged
Various, if -
parts are An ambitious goal for Ken-
VAT 16% 0% (Zero
brought in yan policymakers should be
Rated)
separately to drive the development of
a local EV manufacturing in-
Corporate Tax 30% 10% for 5 dustry, and long term fiscal
years benefits should reflect this.
-
Manufacturer License
should be required in order
to receive these unlimited
tax benefits

27
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
Electric Buses 87024029 Excise Duty 10% 0% (Zero FBUs should be encour-
(FBU) 87024090 Rated) aged for a limited time to
87024091 help to spur market devel-
Import Duty 35% 10% opment, with a cap of 20
units per organization.
-
Importing FBUs creates
VAT 0% 0% up to
just 5% of the jobs of local
20;
manufacturing, and local
Thereafter
assembly is already hap-
16%
pening in limited volumes
Corporate Tax 30% 30% in Kenya. A volume-bound
policy will help to meet the
current demand and reduce
lead times and cost for early
adopters.
Electric Buses 87024029 Excise Duty 10% by HS 0% (Zero Local assembly creates 6x
(CKD / 87024090 code Rated) more jobs than importation
Assembly) 87024091 0% with of FBUs, and two compa-
exemption nies are already assembling
locally in Kenya.
Import Duty 0% 0% (stay of
-
0%)
Assembler License should
be required in order to
VAT 16% by HS 0% (Zero receive tax benefits for
code Rated) assembly.
0% w/ ex- -
emption Ironically, CKDs and locally
Corporate Tax 30% 20% for 5 assembled buses are not
years clearly stated as VAT zero
rated in the 2023 finance
bill, and have required a
short term exemption letter.
This should be clarified in
2024 fiscal policy.
Electric Buses 87024029 Excise Duty 10% by HS 0% (Zero Local manufacturing creates
(Manufacturing) 87024090 code Rated) 20x more jobs than importa-
Electric buses and 87024091 0% with tion of FBUs, and some lo-
bus components exemption cal manufacturing is already
such as motors, Various, if underway.
Import Duty 0% 0% (stay of
controllers, invert- parts are -
0%)
ers, high voltage brought in Manufacturer’s License
parts separately should be required in order
VAT 16% by HS 0% (Zero to receive these benefits.
code Rated) -
0% w/ ex- Ironically, CKDs and locally
emption manufactured buses are not
Corporate Tax 30% 10% for 5 clearly stated as VAT zero
years rated in the 2023 finance
bill, and have required a
short term exemption letter.
This should be clarified in
2024 fiscal policy.

28
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
MHCVs & Trucks 87046000 Excise Duty 10% 0% (Ze- We suggest reduced MHCV
(FBU) 87046090 ro-Rated) excise duties, import
87012410 duties and VAT for 5 years,
Import Duty 35% 10%
87012490 including a more forgiving
87041090 approach toward FBUs.
87024000 VAT 16% 0% with no -
limit The rationale for allowing
FBU MHCVs is that ICE
Corporate Tax 30% 30%
vehicles of this kind are
significant polluters, and
local companies are not yet
producing these vehicles
locally.
-
HS codes for EV MHCVs
are used globally but should
be put into use within the
EAC.
MHCVs & 87046000 Excise Duty 10% 0% (Zero Each CKD unit has the
Trucks (CKD / 87046090 Rated) potential to create up to 20
Assembly) 87012410 local jobs though localiza-
Import Duty 0% (most 0% (stay of
87012490 tion.
codes) 0%)
87041090 -
10% for
87024000 We suggest 0 rating on
87012190
MHCV excise duties, import
VAT 16% 0% (Zero duties and VAT for 5 years.
Rated) -
Assembler License should
Corporate Tax 30% 20% for 5
be required in order to
years
receive tax benefits for
assembly.
-
HS codes for EV MHCVs
are used globally but should
be put into use within the
EAC.
MHCVs & Trucks 87046000 Excise Duty 0% 0% (Zero Manufacturing creates 20x
(Manufacturing) 87046090 Rated) the jobs of imports and over
87012410 4x the jobs of local assem-
Import Duty 0% 0% (stay of
87012490 bly, and must be encour-
0%)
87041090 aged.
87024000 VAT 16% 0% (Zero -
Rated) We suggest 0 rating on
Various, if MHCV excise duties, import
Corporate Tax 30% 10% for 5
parts are duties and VAT indefinitely.
years
brought in -
separately Manufacturing License
should be required in order
to receive these tax ben-
efits.
-
HS codes used globally
should apply.
Batteries, Charging & Services

29
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
EV Charging 85044000 Excise Duty 0% 0% (Zero CAPEX investments for
Infrastructure 85044030 Rated) charging equipment and
85044095 infrastructure are high and
Import Duty 0% 0% (stay of need to be reduced in order
0%) to entice private sector
companies to enter the
market, as currently there
VAT 16% 0% (Zero
are few large players, costs
Rated)
are high, and the pace of in-
frastructure development is
Corporate Tax 30% 10% for 5 too slow to support industry
years growth.
-
This policy should be
open-ended and should not
have time or volume limits,
as reduced charging cost
benefits consumers.

Battery Services N/A Excise Duty N/A N/A Current policy frameworks
(inc charging & do not include any fiscal in-
swapping fees) centives to reduce the cost
Import Duty N/A N/A of electricity delivered to EV
customers. Reduced KPLC
electricity tariffs for e-mo-
bility help, but companies
VAT 16% 0% (Zero
providing end-user battery
Rated)
charging, swapping and
rental services can further
Corporate Tax 30% 10% for 5 reduce costs for custom-
years ers if taxes are reduced on
these services, charges and
fees indefinitely.
-
Can be limited to registered
EV companies
Lithium Ion 85076000 Excise Duty 10% 0% (Zero Batteries make up nearly
Batteries Rated) 50% of the cost of any
(Full Packs) electric vehicle. While
Import Duty 25% 0% (stay of Kenya can and will develop
local EV battery pack
0%)
assembly capacity, for the
time being most batteries
VAT 0% for solar 0% (Zero and components come
16% for Rated) from abroad, and lowering
other cost of imports is important
to allow for knowledge
Corporate Tax 30% 10% for 5
transfer.
years
-
Currently solar batteries
are zero rated, but EV
batteries (globally under HS
Code 8507600010) are not
explicitly exempted. Use
of appropriate HS codes is
critical.

30
 Context, Details &
EV Category HS Code Tax or Duty Current Proposed
Justification
Lithium Ion 85065000 Excise Duty 25% 0% (Zero While developing local
Battery Parts & 85065010 Rated) manufacturing capacity at
Components 85065030 the cell / sub-component
(all parts inc 85065090 Import Duty Various 0% (stay of level will require additional
Cells, Battery 90328900 industrial policy, local
0%)
Management Sys- 85068000 battery pack assembly is
tems (BMS), 85068090 very feasible for Kenya
VAT 16% for EVs 0% (Zero in the short term, and is
Telemetry units)
0% for solar Rated) already happening at scale
Various
units in Rwanda.
Others
Corporate Tax 30% 10% for 5 -
years Tax-free importation of
battery components is
critical to encourage this
transition, thus this policy
should have no time limit.
Lease Payments N/A Excise Duty N/A N/A Because of the high
(EVs & Chargers) CAPEX, most EVs in Kenya
are financed. Excluding
Import Duty N/A N/A VAT on lease payments
and servicing fees for EVs
and EV charging services
will encourage low cost
VAT 16% 0% (Zero adoption of EVs by end
Rated) users.
-
Corporate Tax 30% 30% This could be used to
incentivize adoption of
EVs by corporate fleets,
and particularly benefit
government leasing
programs with a reduced
cost of capital.

The proposed fiscal policy recommendations for Kenya mentioned above aim to promote the
adoption of electric vehicles (EVs) and related infrastructure, reduce carbon emissions, and
foster a sustainable transportation sector. They are intended to help the entire industry gain
traction early, while supporting a transition to ever-more local assembly and manufacturing over
time, to enhance job creation. The policy recommendations are justified by their contributions to
environmental sustainability, economic growth, and technological advancement, as discussed
in Section 3.4.

Ensuring Policies Achieve their Intended Aims

The Government of Kenya and the East African Community (EAC) have shown promising
leadership in passing significant fiscal benefits to facilitate the growth of the EV industry,
particularly through the Finance Act of 2023. However, at times well-intentioned policies have
been limited by lack of clarity, unintended bureaucracies, inconsistencies, or unattainable
requirements, resulting in companies and consumers not fully benefiting from intended policies,
and even at times under-incentivizing companies that have contributed the most to the local
economic growth.

Below, we outline some particular gaps and challenges we have observed as a result
of current policy implementations, and nuances and rationales for some proposed
adjustments mentioned, which are important for policymakers to consider in order to
ensure that policies are implemented in a way that achieves desired outcomes:

31
 • Clarifying HS Codes: The EV industry is new in Kenya, and policies are not always
clearly constructed to include the right HS codes (for example, electric bicycles
require their own separate HS code and tax treatment, and many HS Codes used
globally are not currently in use in the EAC). Ensuring policies address the nuances of
the products will help fair application of policy.

• Consistent Application: Taxes are not always applied consistently across companies
and borders (in part due to a lack of clarity related to HS codes, mentioned above).
Ensuring local authorities are well educated about the products can ensure consistent
application of tax policy across the industry.

• Parts & Components: Current policy (blanket excise duty and VAT exemptions)
over-incentivizes importation of FBU EVs over local assembly and manufacturing, as
components used in producing EVs locally are taxed at a higher rate than imported
FBUs, and not all assemblers import CKDs as defined. Ensuring that licensed assembly
companies have a pathway to zero-rated taxes on sub-assemblies, components and
spare parts used in EVs is critical to encourage the development of local production,
even if implemented via tax reconciliations and refunds. (As examples, the largest
EV motorcycle assembler in Kenya and the largest EV bus assembler in Kenya both
faced challenges benefitting from the zero rated VAT policy as written in the Finance
Act of 2023, because the law was not sufficiently clear that local assembly of EVs
was zero rated, and not just importation of pre-assembled EVs per listed HS codes.)

• CKDs & Containers: So long as a company has a local assembler license, it is

important that CKDs need not be imported all in one container. Such a restriction
would be very limiting to supply chain operations and cost optimization, as finding
the highest quality and/or lowest cost components and parts often means importing
them from several different suppliers and locations.

• Bonded Warehouses: Currently, standards to receive a local assembler license

(in the case of motorcycles, for example) require that companies meet a number
of requirements outlined by the State Department for Industrialization, intended to
ensure assemblers are responsibly registered and accountable for quality. Most of
these standards are excellent quality assurance measures. However, the bonded
warehouse requirement is unnecessary and prohibitive for some companies and
should be removed for EV companies, for a period of two years.

• EAC Import Duties: We understand that import duties are governed by the EAC. We
note that Rwanda and Uganda have successfully applied for a 0% stay on import
duties to be applied to EVs; We propose Kenya do the same.

Ensuring that future policies and regulations passed and guidelines published reflect the
matters above will ensure that policymakers achieve their intended aims to support the sector,
with a particular focus on stimulating local jobs growth, supporting the EV sector without
unintentionally favoring certain players over others. EMAK requests a particular focus on these
policy nuances when formulating policies going forward.

3.3 Pathway Toward Local Value Creation

This paper predominantly focuses on a series of time-bound fiscal incentives specifically
targeted at the EV industry. For example, we suggest unit limits on tax benefit for the import of
FBUs, and more significant tax benefits for 5 years for local assembly of EVs. The eventual aim
of such policies are to stimulate a local EV manufacturing industry, with significant job creation
and eventual tax revenue benefits.

32
Thus while we primarily focus on these near-term benefits for EVs, we must also put these into
context of a longer term policy framework to incentivise local industry. A precedent does exist
in the of two sub-sectors: Legal Notice 112 and 84 provide a pathway to transition from an
authorized assembler to a manufacturing license for motorcycles and buses. This process was
originally designed for the fossil-fuel based vehicle assembly industry, but can be expanded to
other vehicle sectors and to EVs. There are amendments awaiting signing to include provisions
designed for the Electric Vehicles (EV) industry, which we encourage executing in addition
to the EV policies mentioned above. Providing companies a pathway from assembly to a
manufacturing license outlines fiscal benefits to accelerate localization of supply chains and
job creation. Signing the amendments to LN 112 and LN 84 and widening the scope of local
value would be the highest impact intervention to support green industrialization.

Encouraging an EV sector built around a backbone of local value addition is critical. Manufacturing
has the highest job creation potential of all sectors, with 18.6 jobs created across the value-chain
per job in manufacturing for small and medium companies and up to 25.9 for large companies
(Source: CDC). Local Assembly is an important stepping stone, but creates only 30% of the
jobs created by manufacturing. Importing Fully Build Units only creates 5% of the jobs created
by manufacturing. Thus it is clear that if Kenya wishes to achieve its Big Four Agenda, weaving
incentives for local assembly and manufacturing into EV policy is a must.

South Africa has successfully built an automotive-driven manufacturing sector, which contributes
over 15% to the GDP (including the automotive, manufacturing and mining sectors). We see a
similar opportunity within Kenya over the next decade to leverage the current trends in electric
mobility worldwide and create green jobs, reduce the burden of fuel imports and eventually even
begin exporting from Kenya. While importing fully-built units on the short-term is important to
kick-start the electric mobility industry and encourage new entrants into the market, the value
of localizing manufacturing and assembly long term is equally as important in order to create
jobs, build local capacity and develop Kenya as an electric mobility leader in the region.

With this in mind below we suggest a few pillars of fiscal policy and industrial policy to support
the development of Kenya as Africa’s leading EV production & R&D center:

1. Implement the EV fiscal policy incentives outlined in the table in Section 3.2. Start
with fiscal policy incentives to include all routes to bringing electric vehicles to market
in the short-term, including importing Fully Built Units (FBU) (with limits), Completely
Knocked Down kits (CKD), full local assembly (under a license) and manufacturing
as an Original Equipment Manufacturer (OEM), but with clear graduated benefits for
greater local value addition. Amending existing legal notices (i.e. LN 84 and LN 112)
should be complementary to (not in lieu of) these graduated EV-specific fiscal policy
recommendations.

2. Limit the number of Fully Built Units that can be imported to ensure this may be an entry
point to start business and validate the market demand: 150 units per organization
for 2-wheelers and 3-wheelers, 20 units for buses). 4-wheeler passenger vehicles and
medium and heavy duty commercial vehicles are more complex sub-sectors which
require additional support, and we expect importation may continue to be necessary
for the foreseeable future.

3. Sign the Amendments (as proposed in 2023) for Legal Notice 112 and 84 to
include Electric Vehicles and EV Batteries, and allow for a phase-in period
of localization requirements of 24 months. Thus local assemblers not yet
meeting localization requirements may nonetheless benefit from the tax
incentives outlined in the legal notices, so long as they demonstrate a path
toward meeting the requirements by mid 2026. Consider expanding these
legal notices to include 3- and 4-wheel vehicles and heavy duty machinery.

33
 4. Allow a two year exemption to the bonded warehouse requirement currently necessary
to receive and Assembler License. This is currently unnecessarily limiting many local
EV companies from becoming assemblers.

5. Differentiate fiscal incentives to prioritize local value addition as per the legal
notice, and ensure that components used in EVs are taxed lower than FBUs.
Outline additional long-term benefits for Licensed Manufacturers, such as
exemption from levies and permits, stamp duty exemptions, 200% investment
allowance, and preference for locally manufactured EVs in procurement
tenders.
6. Today, only physical components manufactured locally are considered local value.
We propose to include research & development, design & engineering, investment in
tooling and equipment when considering local value creation.

The recommendations above build on precedence in existing law and provide a strong
transition program from importer to authorized assembler to the manufacturers license. By
putting shorter term policies encouraged to kickstart the EV industry into the context of Kenya’s
overall industrialization objectives, this green industrialization strategy can help to ensure Kenya
becomes the clean transport leader of Africa.

3.4 Policy Justifications

The benefits of the above policy suggestions can not be understated. While we quantify the
implications of various policy scenarios in Section 4, we first wish to outline some of the overall
benefits to the government, companies, consumers and the environment, both tied to specific
tax policies, and in terms of societal impact.

Reduced Excise Duties:

• Encouraging local production: By reducing taxes on local EV transitions,

policymakers will be incentivizing the local assembly of EVs and a local supply chain,
as opposed to penalizing companies for transacting locally. The proposed zero-rated
excise duty will stimulate economic growth, attract investments in the automotive
sector, and create jobs and supply chains.

34
 • Alignment with government agenda: The proposed excise duty exemption aligns
with the government's Big Four Agenda, particularly in enhancing manufacturing
and creating jobs. It supports the government's efforts to promote sustainable
development and transition to a green economy.

Reduced Import Duties:

• Supporting early market growth: Reducing import duties on limited FBUs, and
reducing duties on parts and components to zero will incentivize both early importation
of EVs and longer term local assembly and sourcing of components.

• Encouraging local production: The elimination of import duties on key components

(while keeping them in place for FBUs over time) will encourage investments in
local assembly and manufacturing of EVs. It aligns with Kenya’s Big Four Agenda,
particularly in enhancing manufacturing and creating jobs.

• Lower cost for consumers: High import duties for sectors where local production is
not yet ready at scale make EV adoption untenable for consumers (this is particularly
acute for 4-wheeler vehicles). By zero-rating the import duty for certain sub-sectors,
the government can encourage adoption among a wider range of Kenyans and
support a transition to clean transportation.

Reduced Value Added Tax (VAT):

• Affordability: Exempting VAT on EVs and battery charging & services will significantly
reduce the lifetime cost of owning and operating electric vehicles.

• Competitiveness: By leveling the playing field with traditional vehicles, which

often have lower upfront costs, the proposed VAT exemptions will make EVs more
competitive in the market as battery costs come down over time.

Reduced Corporate Tax:

• Attract investment: Lowering the corporate tax rate for EV companies will make
Kenya a more attractive destination for investment in the EV industry by both local
and foreign companies, and support local job creation.

• Increase government revenue: The cost of a corporate tax reduction is relatively

low, as most EV companies are young and are not yet major income tax payers.
Over time, the broader base of companies and increased economic activity in the EV
sector will ultimately lead to higher overall tax revenues.

Reduced Tax on Electricity, Services & R&D

• Reduced Operational Costs: The removal of VAT rate on electricity, charging,
swapping and related services for e-mobility will further decrease the operating costs
of EVs. This is particularly important in Kenya, where electricity costs are higher than
those of neighboring countries and the cost of electricity can be a significant factor in
the total cost of ownership for electric vehicles.

• Encourage research and development: A lower corporate tax rate and removal
of VAT on EV-related R&D would provide additional resources for companies to
invest in research and development, leading to advancements in EV technology and
infrastructure that are tailored to Kenya's unique needs.

35
Economic Benefits:
• Attracting investments: Lower taxes and duties on EVs and related infrastructure
will attract investments from both domestic and international companies. This can
lead to the development of new industries and technologies in Kenya, boosting the
economy and creating job opportunities.

• Stimulating economic development: The growth of the EV market can stimulate

economic development in various sectors, including automotive, energy, and
technology. This can lead to increased productivity, innovation, and competitiveness,
positioning Kenya as a regional leader in sustainable transportation solutions.

• Technological innovation: The adoption of electric vehicles can drive technological

innovation in areas such as battery technology, charging infrastructure, and smart
mobility solutions. This can enhance Kenya's technological capabilities and contribute
to the country's long-term economic growth and sustainability.

Environmental Benefits
• Cleaner air: The transition to electric vehicles (EVs) will significantly reduce emissions
from the transportation sector, which is a major source of air pollution. By replacing
internal combustion engine vehicles with EVs, Kenya can decrease the levels of
harmful pollutants such as nitrogen oxides, particulate matter, and carbon monoxide,
leading to cleaner and healthier air for its citizens.

• Reduced carbon footprint: EVs have a lower carbon footprint compared to

traditional vehicles, especially when charged with electricity from renewable sources.
By promoting the adoption of EVs, Kenya can reduce its greenhouse gas emissions,
contributing to global efforts to combat climate change and aligning with the Paris
Agreement goals.

• Conservation of natural resources: EVs are more energy-efficient and rely on

electricity, which can be generated from renewable sources such as solar, wind, and
hydro. This reduces the dependence on fossil fuels, conserving natural resources and
promoting sustainable energy use.

Social Benefits
• Healthier population: Air pollution is linked to various health issues, including
respiratory diseases, cardiovascular problems, and premature death. By reducing
emissions from vehicles, the shift to EVs can lead to a healthier population, with fewer
pollution-related health problems and a lower burden on the healthcare system.

• Improved quality of life: Cleaner air and a quieter urban environment, due to the
reduced noise pollution from EVs, contribute to a better quality of life for residents.
This can lead to increased satisfaction and well-being, making cities more livable and
attractive places to work.

• Inclusive economic growth: The growth of the EV market can provide new
opportunities for employment and entrepreneurship, particularly in sectors related to
renewable energy, automotive manufacturing, and technology. This can contribute to
inclusive economic growth, benefiting a wide range of citizens.

36
4. Impact of Proposed Fiscal
Incentives
4.1 Methodology
In this section, we outline our approach to conducting an in-depth quantitative analysis of
the potential economic, environmental and societal benefits stemming from proposed fiscal
incentives within the e-mobility industry in Kenya.

Our study delves into three distinct scenarios, evaluating the contrasting outcomes influenced
by varying degrees of government support. We focused on four primary variables for this
modeling: Excise Duty, Import Duty, Value-Added Tax (VAT) and Electricity Tariffs. The impact
of these proposed policies were modeled across all categories of electric vehicles (EVs) and
lithium-ion batteries. Through this comprehensive analysis, we aim to provide valuable insights
into the economic implications of implementing fiscal incentives for EV adoption in Kenya.

Scenario Fiscal Policy Element

Low government support Full (16%) VAT across all EV categories & lithium-ion batteries
Standard ICE excise duty across all EV categories (no exemption)
Standard ICE import duty across all EV categories (no exemption)
Standard electricity tariff across all EV categories
Moderate government support Zero VAT across all EV batteries and locally assembled vehicles
(Status Quo) Excise duty:
Exemption for bicycles and motorbikes
10% for buses and cars
10% for lithium ion batteries
Import duty:
Exemption for bicycles
10% across all other EV categories
25% for lithium-ion batteries
16 KES/kWh day / 8 KES/kWh night tariff across all EV categories
High government support Zero VAT across all EV categories and lithium ion batteries
Excise duty exempt across all EV categories and lithium ion batteries
Import duty exempt across all EV categories and lithium ion batteries
12 Ksh/KWh day time tariff and 8 Ksh/KWh day time tariff

Data Collection
To conduct this study comprehensively, we adopted a multi-faceted approach to data collection,
drawing from various reliable sources including the National Transport and Safety Authority
(NTSA), Kenya National Bureau of Statistics, and surveys conducted among 10 companies
operating within the e-mobility industry.

Our primary objective during data collection was to gather comprehensive statistics on both
traditional internal combustion engine (ICE) vehicles and electric vehicles (EVs). This involved
obtaining key data points essential for our analysis, including the number of EVs currently
operating in the country, the total distance covered by EVs, anticipated fuel savings resulting from
increased EV adoption, electricity consumption patterns related to EV charging, estimations of
potential carbon credits from reduced emissions, and insights into the number of jobs generated
by the e-mobility industry.

37
By gathering and analyzing this data, we aimed to provide a holistic understanding of the
potential economic, social and environmental benefits associated with the proposed fiscal
incentives for EV adoption in Kenya.

4.2 Model Structure

After the thorough collection of data, we proceeded to simplify our findings by constructing a
comprehensive model. This model served as a tool to outline the costs and benefits associated
with the implementation of fiscal policies within the three aforementioned scenarios, over a five
year period.

In terms of economic benefits, our analysis revealed several significant advantages:

• Firstly, the implementation of fiscal policies is anticipated to yield a notable increase

in revenue for the government. This revenue surge would stem from various sources,
including charging revenue and reduced import purchases.

• Moreover, transitioning to electric vehicles (EVs) is poised to substantially curtail the

nation's reliance on imported oil, resulting in significant foreign exchange savings.

• Additionally, our model factored in the potential revenue streams generated through
EV charging services, as well as the utilization of curtailed electricity, further amplifying
the economic benefits of e-mobility initiatives.

Alongside these economic benefits, there are also associated costs to consider:

• For instance, the model accounted for the potential losses in VAT revenue from
the importation and sale of fuel, as well as the reduction in duties resulting from EV
adoption.

Beyond the economic benefits, our analysis also shed light on the environmental and social
benefits of implementing fiscal policies to promote EV adoption:

• Environmentally, the transition to EVs is expected to generate carbon credits and

significantly reduce greenhouse gas emissions, contributing to efforts aimed at
combating climate change, air pollution, and respiratory illness.

• Socially, the e-mobility sector is poised to create significant local employment

opportunities across the value chain, thereby fostering job creation and economic
empowerment within the workforce.

4.3 Limitations
While our model provides valuable insights into the economic, environmental, and social
impacts of implementing fiscal policies to promote electric vehicle (EV) adoption, it is important
to acknowledge several limitations that may affect the accuracy and comprehensiveness of our
findings.

• Exclusion of Other Tax Revenue Sources and Costs: One notable limitation is
the focus primarily on the direct economic impacts related to EV adoption, such as
revenue from import taxes and value-added tax (VAT). The model does not account
for potential indirect effects on other tax revenue sources for the government, such
as Pay As You Earn (PAYE) taxes or corporate income taxes. The exclusion of these
revenue streams may lead to an underestimation of the overall fiscal implications
of transitioning to EVs. Costs excluded include corporate taxes as well as forex
exchange losses from EV importation.

38
 • Impact on Other Industries: Another limitation is the omission of potential effects
on other industries, particularly those closely linked to the petroleum and automotive
sectors. The widespread adoption of EVs could result in significant disruptions and
restructuring within industries such as petrol stations, oil refineries, and automotive
manufacturing. Failure to consider these broader economic ramifications may result
in an incomplete understanding of the overall impact of EV adoption on the economy.

• Health Impacts: Additionally, the model does not incorporate an analysis of the
potential health impacts associated with the widespread adoption of EVs. While EVs
are generally considered to have lower emissions compared to traditional internal
combustion engine vehicles (up to 90% reduction in particulate matter pollution, in the
case of electric motorcycles in Kenya), there may still be health-related consequences
associated with factors such as particulate matter emissions from tire wear and road
dust. Ignoring these health considerations may underestimate the societal benefits
of transitioning to EVs or fail to capture potential costs associated with any adverse
health effects.

• Data Availability and Accuracy: Furthermore, the limitations of the analysis may be
compounded by constraints related to data availability and accuracy. The reliability of
the model's predictions depends heavily on the quality of the data used as inputs. In
cases where data is scarce or subject to uncertainty, the robustness of the model's
conclusions may be compromised.

4.4 Quantification of Benefits

4.4.1 Electric Vehicles registered
Targeted, well crafted policies reflective of the realities and challenges of both the
supply side and demand side of the market can drive significant growth in the electric
vehicle market. The 2023 Finance Act was largely responsible for the 408% year over
year growth rate from 2022 to 2023, and enhancements to these policies can lead to
even more growth. The graph below shows the expected cumulative growth in EVs
in low, moderate and high policy support scenarios. In a high support scenario, we
expect over 800,000 electric vehicles could be on the road by the end of 2028. Notably,
only in the high support scenario do we expect to hit the government’s target that 5%
of all new vehicle registrations in 2025 are electric vehicles (with 27 thousand new
registrations assumed, as opposed to 14 thousand with moderate status quo policies
and just 8 thousand registrations in a low support scenario.

Most of the growth in EV registrations is expected to be from motorcycles and bicycles

(reaching as high as 300,000 and 150,000 annual sales in 2028, respectively in a high

39
support scenario). However, with the right support, electric bus sales could surpass
2023 ICE bus sales, and passenger cars could reach 50% of annual sales volumes in
2023, supply allowing. Though not modeled in our analysis, heavy and medium duty
commercial vehicles (a category in which there are no electric vehicles currently in the
country) also have great promise for growth if supported with the right policies.

4.4.2 Reduced foreign currency reserve expenditure on fuel imports

One of the primary benefits of EVs is the reduction of expenditure on imported fossil fuels. In our
model, foreign currency reserve savings were calculated by analyzing the reductions in landing
costs and storage expenses associated with fuel imports. This computation was predicated
on the volume of fuel that electric vehicles (EVs) would have consumed had they operated as
internal combustion engine (ICE) vehicles. In the high support policy scenario, Kenya stands to
avoid the importation of over 1 billion liters of oil over five years, resulting in a substantial saving
of USD 680 million for the government in the next five years. (The graph to the left shows annual
savings in USD). This savings is particularly significant considering the prevailing fluctuations in
the USD/KES exchange rate, coupled with Kenya's near term Eurobond repayment obligations
and recent inflation challenges.

40
4.4.3 Government tax revenue from increased electricity consumption of EVs

When examining the potential revenue streams for the government (in the form of tax and
duty revenue) related to charging of EVs, we observe significant disparities across the different
support scenarios. In the high support scenario, the government stands to generate a total of
USD 110 million over the next five years (not including tariff revenue accruing to Kenya Power),
dwarfing the figures of USD 39 million and USD 19 million projected for the moderate and low
support scenarios, respectively, over the same period. Notably, in the high support scenario, the
tariff structure entails a day-time rate of 12 Ksh/KWh and a night-time rate of 4 Ksh/KWh, and
VAT is removed on electricity tariffs - but nevertheless government revenue increases due to the
significant growth in EVs as a result. While a preferential EV tariff structure and removal of VAT
initially results in lower tariff revenue before EVs scale, the subsequent years witness a rapid
increase in revenue generation. Lower effective electricity tariffs (after taxes and duties) are
among the most impactful incentives to drive swift and substantial adoption of electric vehicles,
thereby driving up consumption and consequently boosting tariff revenue in subsequent years.
4.4.4 Electricity consumption from charging electric vehicles

According to EPRA's 2023 statistics report, 495 GWh of energy was curtailed during the
2022/2023 period. In the high government support scenario, electric vehicles are projected
to consume 1,000 GWh of electricity annually by 2028, much of this coming from charging
EVs at night, effectively reducing the amount of curtailed energy and the potential economic
loss associated with unused energy production capacity. This is expected to generate over 85
million USD in electricity sales revenue for Kenya Power in a high support scenario.

41
4.4.5 Emissions reduction due to displacement of fossil fuels

As outlined in the introductory chapter, the transport sector has set ambitious goals to reduce
emissions by 3.46 MtCO2e by 2030, compared to a baseline of 21 MtCO2e. Under the provisions
of the 2023 Finance Act, the moderate scenario is expected to facilitate a reduction of 62
thousand tonnes of CO2 over the next five years. However, by adopting policy recommendations
in this paper (the high support scenario), carbon emissions reduce by nearly 230 thousand
tonnes over the same five year period. These measures not only enable the transport sector
to meet its emission reduction target but also have follow-on impacts on particulate matter
pollution and respiratory health, marking significant progress toward achieving environmental
sustainability and public health goals.

Additionally, the economy stands to gain over 15 million USD from carbon credit sales,
calculated based on a market rate of USD 40 per carbon credit. With enhanced bilateral carbon
market deals currently under negotiation, additional value is likely to accrue to the EV sector.
EMAK applauds the significant progress Kenya has made in negotiating these agreements to
allow Kenya to access compliance based carbon markets, and we encourage the government
to proceed cautiously when considering taxation of carbon credits, which could complicate
successfully attaining these gains.
4.4.6 Job creation
The adoption of electric vehicles (EVs) is poised to catalyze the creation of a multitude
of direct and indirect employment opportunities across various sectors. OEMs and
distribution companies create direct employment within their organizations, and EVs
create direct employment for commercial drivers who purchase or use EVs, as evidenced
by the significant growth of fleet delivery and transportation service drivers employed
by companies such as eBee and Greenwheels within electric-only fleets. A multitude
of indirect job opportunities (in both the formal and informal sectors) are emerging in
areas such as last-mile delivery services, ride-hailing platforms, after-sales service and
maintenance, and charging services. These job markets can be enhanced by targeted
training programs, particularly to bring more young people and women into the electric
mobility workforce.

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Based on our projections, status quo policies are forecasted to generate a total of 80 thousand
jobs by the year 2028. A high support scenario is anticipated to yield far more substantial
results, with nearly 325 thousand jobs projected to be created within the next five years.
This will particularly be the case if policymakers focus on the development of local supply
chains, assembly and manufacturing of EVs and batteries. Just how many jobs are created
depends heavily on how the Government of Kenya elects to implement policies balancing
industrialization relative to importation. While imports will play a critical role in the early years of
the industry, local assembly creates 6 times as many jobs as importation, and manufacturing
creates 20 times as many jobs as importation. For this reason, we have proposed the graduated
fiscal benefits in the tables in Section 3. By fostering job creation, economic empowerment,
and industrialization, the adoption of EVs plays a pivotal role in elevating living standards and
fostering sustainable development.

4.5 Quantification of Costs & Tradeoffs

4.5.1 VAT revenue foregone due to reduced fuel importation
With adoption of electric vehicles we expect a notable drop in ICE vehicle registrations
and imports of fuels. This reduction will have significant fiscal implications that must be
considered and weighted against the benefits noted above. Among the most notable
sources of government revenue likely to be impacted is reduced Value-Added Tax (VAT)
stemming from a reduction in fuel imports. (Another, not covered in this paper, is a
reduction in revenue from the Fuel Levy used to fund Kenya’s roads.) We focus here on
VAT on fossil fuel imports because of its magnitude: VAT is applied twice, first during
the importation of oil and subsequently upon sale at petrol stations. Under the current
policy (medium support) scenario, the government is expected to face a total revenue
loss of USD 116 million over five years, while in the high support scenario, this loss
escalates materially to USD 460 million over the same period (with a budgetary impact
of 325 million in 2028 alone). While this is material, as we will see in Section 4.6, we
do expect this to be sufficiently offset by increased revenue elsewhere. Nevertheless,
planning ahead from a budgetary allocation perspective is critical to a smooth transition
to EVs.

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4.5.2 Impacts in import duties, excise duties, and VAT revenue
Naturally, reducing import duties, excise duties, and VAT as advocated in this paper
results in lower tax revenues per electric vehicle. We have analyzed just how large this
impact is expected to be, to allow policymakers to budget for this opportunity cost.
It is interesting to note that in a moderate support scenario, we expect a net negative
impact on revenue from taxes and duties over the next three years (relative to a low
support scenario). However, due to the growth in the sector created by those lower
taxes, by 2027 we expect tax and duty revenue to actually increase above the level of
revenues expected to be collected in a “full tax” scenario. By growing the tax base,
lowering taxes is expected to result in a net neutral tax revenue position after five years
(with approximately 220 million in taxes collected in each scenario over the period).

The same cannot be said for a high support scenario, as in such a scenario we anticipate zero
rating on import duties, excise duties and VAT, yielding a material drop in tax revenue (note
zero revenue under “high support” in the graph above through 2028). As we shall see below,
however, the government revenue generated from other means as a result of the growth in EVs

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more than makes up for the tax losses incurred in the high support scenario. Moreover, we
advocate for this zero rating to apply to assembly companies only through 2028, and thereafter
only manufacturers shall be eligible, thus limiting the tax revenue loss to the period of five years
only.

4.6 Cost-Benefit Analysis of Proposed Policies

By aggregating the aforementioned revenue from various sources generated and foregone as
a result of a transition away from fossil fuels and toward locally-assembled, locally powered
electric vehicles, a clear picture emerges of not only the environmental and social benefits of
incentivizing electric vehicles, but also the net fiscal benefits for the Government of Kenya.
In each case - low, moderate and high support scenarios - growth in the EV sector results
in a net positive revenue for the Government of Kenya, with government revenue from sales
of electricity and avoided foreign currency reserve depletion on fossil fuel imports more than
offsetting reductions in tax revenues associated with the proposed tax benefits and lost VAT
on fuel imports.. After just four years, annual net revenue under the high support scenario
surpasses that of both the status quo moderate support scenario and the low support scenario,
and by 2028, aggregate net government revenue under our proposed high support scenario
($333 million) exceeds that of the current policy scenario ($328 million) and low support
scenario ($279 million), while significantly benefiting Kenyan society, our environment, an our
industrialization agenda.

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Our analysis underscores the compelling case for the Government of Kenya to embrace fiscal
policies that support electric mobility. Such a short payback period to develop Kenya into not
only the largest EV market on the continent, but a leading regional producer in the electric mobility
value chain is an investment worth making. It is important to note that while our analysis focuses
on government budgetary impacts over the next five years (and does not factor in additional
revenue for KPLC), the most material gains in government revenue are expected to come aftee
2028. Following a five-year payback of 333 million, we expect government revenues to materially
increase after year five, as - per our policy recommendations in Section 3 - we expect fiscal
benefits to be reduced, leaving significant tax benefits in place only for those companies that
invest in localization of their supply chains and become licensed manufacturers. This phasing
down of incentives to focus on local manufacturing will further enhance the 325 thousand
jobs expected to be created during the first five years of fiscal benefits. The analysis herein
conservatively demonstrates that in both the short term and the long term, the government and
various government agencies stand to accrue significant economic benefits from fostering the
transition to e-mobility.

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5. Conclusion & Recommendations
Kenya's journey towards sustainable development and economic resilience is significantly
advanced by the adoption of electric mobility, offering immense economic, environmental, and
societal benefits. This transition could save the country USD 684 billion in foreign currency
reserves over the next five years, highlighting the economic advantage of reducing oil imports,
and generate up to USD 110 million in tax and duties revenue for the government from electric
vehicle charging, showcasing e-mobility as a key driver for economic growth.

The environmental benefits are notable, with a potential reduction of CO2 emissions by over
600 thousand tonnes in three years, advancing Kenya's commitment to emission reduction
and climate change mitigation. The shift to EVs also promises over 325,000 new jobs, boosting
economic prosperity and enhancing the social fabric of the nation, all while putting over 800,000
electric vehicles on the road by 2028 powered by locally generated green electricity.

By providing fiscal incentives in a thoughtful, deliberate way in line with Kenya’s industrialization
and job creation agendas, the benefits of an accelerated e-mobility transition far outweigh
initial revenue impacts, resulting in a net gain for the Government of Kenya of USD 333 million
over five years, a position expected to grow materially after year 5 as subsidies are peeled
back. Legislative and regulatory support, including the Finance Act 2023 and EPRA-approved
KPLC e-mobility tariffs, have laid a strong foundation for the EV sector, and incremental policy
improvements in 2024 are crucial for maximizing e-mobility's potential. Policies already in place
can have even greater intended impact with slight improvements noted herein, particularly
focusing incentives on local assembly and manufacturing and broadening them to include all
electric vehicle categories, batteries, electricity tariffs, and services.

Kenya is well positioned to adopt a strategic, comprehensive and cohesive e-mobility plan that
promotes fiscal incentives and supports the local automotive industry to harness the full benefits
of this transition. Through collaborative efforts, Kenya can lead the continent in sustainable
mobility, driving the nation towards a greener, more prosperous future. In conclusion, the call to
action is clear: Kenya must forge ahead with a coherent, ambitious e-mobility strategy based
on fiscal incentives that leverage its early industry leadership position and great potential for
local value creation.

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6. References
“E-mobility in Africa.”, Cliffe Dekker Hofmeyr, November 2023.
https://www.cliffedekkerhofmeyr.com/sectors/downloads/eMobility-in-Africa-Guide.pdf

“Environment for Development (EfD).”, November 2022.

https://www.efdinitiative.org/news/e-vehicles-exempted-tax-ethiopia-ige-fellow-wrote-
proposal

“Energy & Petroleum Statistics Report.”, EPRA, June 30 2023.

https://www.epra.go.ke/energy-petroleum-statistics-report-for-the-financial-year-ended-30th-
june-2023/

“Finance Act 2019.” Government of Kenya, November 7, 2019.

http://kenyalaw.org/kl/fileadmin/pdfdownloads/AmendmentActs/2019/FinanceAct_
No23of2019.PDF.

“Finance Act 2023.” Government of Kenya, June 26, 2023.

https://kra.go.ke/images/publications/The-Finance-Act--2023.pdf.

Interviews with organizations in Kenya within the e-mobility industry, January 2024.

“Rwandan Journey Towards Electrification of Mobility.’’ Republic of Rwanda Ministry of

Infrastructure, September 05, 2022
https://unece.org/sites/default/files/2022-09/WP5_Session35_JanvierTwagirimana.pdf

“The EAC Common External Tariff (CET) and Rwanda.”, February 18, 2012.
https://www.theigc.org/sites/default/files/2014/10/Frazer-2012-Working-Paper.pdf

“Transport Sector Climate Change Annual Report”, Ministry of Transport, Infrastructure,

Housing, Urban Dev. & Public Works, 2019 - 2020.
https://changing-transport.org/wp-content/uploads/Kenya-transport-annual-report_Jan-2021.
pdf

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