Kenya’s burgeoning e-mobility industry is urging the government to reconsider proposed taxes on electric motorcycles, e-buses, and lithium-ion batteries in the Finance Bill 2024.
The sector, which has experienced significant growth in recent years, argues that these taxes could stifle further development and hinder the country’s transition to cleaner transportation.
Public Participation and Industry Concerns
The government is currently holding public hearings on the Finance Bill 2024, allowing stakeholders to provide input before the bill becomes law. BasiGo Kenya, a leading player in the East African e-mobility sector, and the Electric Mobility Association of Kenya (EMAK) have voiced their concerns to the Finance and Budget Committee.
They argue that the proposed taxes could reverse the incentives that have fueled the e-mobility sector’s impressive growth, resulting in higher prices for consumers and discouraging investment in the industry.
In just one year, the sector has saved over one million liters of fossil fuels, attracted over $100 million in investment, significantly reduced emissions, and saved consumers 30-40% in transport costs.
Impact on Electric Vehicle Adoption
The Finance Bill 2023 had previously granted several incentives to the e-mobility sector, including zero-rating VAT on e-buses, electric motorcycles, and lithium-ion batteries. However, the new bill proposes to subject these items to the standard 16% VAT rate.
EMAK warns that this would increase the cost of electric motorcycles, making them less affordable for consumers.
It would also disadvantage manufacturers and assemblers who pay input VAT on various components, potentially discouraging the growth of the sector and hindering the uptake of electric vehicles (EVs).
Concerns over Investor Confidence and Climate Goals
Industry stakeholders fear that the proposed tax changes could deter investors who have already made substantial investments in Kenya’s e-mobility sector in response to the previous incentives.
This could jeopardize the country’s ambition to become a manufacturing hub for African EVs and hinder its progress towards its climate change commitments, which include reducing greenhouse gas emissions and promoting low-carbon transport systems.
Balancing Incentives and Affordability
While the Finance and Budget Committee acknowledges the concerns raised by the e-mobility sector, some members have pointed out that the previous incentives have not yet translated into tangible benefits for many Kenyans, as electric motorcycles and cars remain out of reach for a large portion of the population.
This highlights the need for a balanced approach that encourages the growth of the sector while ensuring affordability and accessibility for consumers.
As the government considers the feedback from stakeholders, it faces the challenge of striking a balance between promoting a nascent industry and ensuring its financial sustainability.
Finding a solution that supports the growth of the e-mobility sector while addressing concerns about affordability and accessibility will be crucial for Kenya’s transition to a cleaner and more sustainable transportation system.
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