It's a bumpy ride for e-mobility firms in bid to move past start-up phase

They also say there is a need to extend incentives to other players along the chain, including customer-facing players such as financiers.

They say due to the unique nature of Electric Vehicles (EVs) where the upfront costs are extremely high, some players finance EV buyers who also need consideration in the State's bid to grow the sector.

BasiGo Chief Executive Jit Bhattacharya said the industry needs investments to help it move to the next stage and drive more change in the local transport industry, which he noted could serve as a model for other countries with the potential to become a beacon of sustainable transportation solutions.

He said most local e-mobility firms, including his own, are startups reliant on venture capital and private equity.

Mr Bhattacharya emphasised the need for foreign direct investment (FDI) from commercial investors, urging policymakers to create a conducive environment for attracting such capital.

"Most of the local companies in e-mobility are still startups, most of us are pre-profitability. We are financed by venture capital and private equity," he said. "The industry requires FDI from commercial investors, and what we are asking for from policymakers is to lay that foundation for us to drive that investment.

"Because of the climate impact of what our industry can achieve we are a prime target for climate finance supporting the growth of the e-mobility industry in Kenya. We can be a lighthouse for so many other countries. We can make Kenya a leader in e-mobility globally."

He said tax incentives have increased the uptake of electric vehicles in the country.

The government has in the recent past tried to incentivise Kenyans to transition to electric vehicles through such measures as reducing excise duty on EVs from 20 per cent to 10 per cent and exempting fully electric cars from Value Added Tax (VAT).

It also introduced an e-mobility tariff that offers EV owners cheaper rates to charge their cars.

According to the Energy and Petroleum Regulatory Authority (Epra), the number of registered electric vehicles rose 250 per cent in the six months to December 2023, increasing the number of EVs in the country to 3,753. This was due to the incentives the government implemented.

Electric mobility isn't just about transportation anymore-it's about creating a whole system that's sustainable and works well with our daily lives. [iStockphoto]

"One of the primary benefits of EVs is the reduction of expenditure on imported fossil fuels. In the high support policy scenario, Kenya stands to avoid the importation of over one billion litres of oil over five years, resulting in a substantial saving of $680 million for the government in the next five years. The savings are particularly significant considering the prevailing fluctuations in the exchange rate, coupled with Kenya's near-term Eurobond repayment obligations and recent inflation challenges."

e-mobility conference

In a white paper that Mose presented last week at the e-mobility conference as the industry pitched for government support, EMAK notes that with high support from the government and in turn increased uptake of EVs, the sector could be consuming 1,000 gigawatt hours of electricity annually by 2028.

The sector could also create 325,000 jobs over the next four years. This is a substantial amount of electricity consumption, which at the moment consumption trends would amount to about 10 per cent of total total electricity Kenya Power sells. The firm sold 9,567 gigawatt-hours in the year to June 2023 to its consumers.

The flip side to this is that the government will have to take a hit in tax revenues.

Aside from the taxes foregone in waiving taxes on EVs, increased adoption will result in a significant reduction in taxes from fossil fuels, which have always been a guaranteed revenue source for the government and also among the products that have always been ripe for higher taxes.

Over the current pricing cycle that ends May 14, the government gets Sh76.57 shillings for every litre of petrol that will be consumed in the country. This translates into about 40 per cent of the retail price of Sh193.70 a litre in Nairobi. With the millions of litres of fuel, the government gets more than Sh250 billion in taxes from petroleum products annually, which is more than 10 per cent of tax revenues.

The EV industry, however, notes the opportunities created by the EV industry will more than make up for the losses that the government will experience in giving the industry tax breaks and also losses that will be experienced due to a drop in petroleum consumption.

"The government revenue generated from other means as a result of the growth in EVs 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," said EMAK.

Perhaps a more appealing argument for the state is the reduction in oil import bill that could come with the adoption of EVs. Kenya in 2022, according to data from the Kenya National Bureau of Statistics (KNBS), spent Sh630 billion in importing petroleum products.