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The transition to e-mobility can stimulate new industries and services.[iStockphoto]
The electric vehicle (EV) industry, a cornerstone of sustainable transportation, has witnessed significant growth worldwide. Governments globally are introducing policies to promote EV adoption, leveraging its potential for reducing greenhouse gas emissions and reliance on fossil fuels. However, the case of Kenya highlights a perplexing scenario where recent government policies seem to contradict the initial supportive measures, raising questions about the country's commitment to sustainable development.
In the past few years, Kenya has made commendable strides in promoting e-mobility. The government's early initiatives included removing VAT on electric vehicles and batteries, which catalyzed the growth of the EV industry. This policy environment fostered innovation and investment, aligning with Kenya's renewable energy strengths. With over 90 per cent of its electricity sourced from renewables, Kenya is well-positioned to lead in green transportation. President William Ruto’s vision of achieving 100 per cent renewable energy by 2030 further underscored this commitment.
Finance Bill threatens e-mobility progress
Proposed tax changes threaten to claw back the incentives that fuelled the e-mobility boom. This sudden policy reversal starkly contrasts the unified support from the Ministries of Transport, Energy, Industrialization, and Environment, all of which recognise e-mobility as a cornerstone of Kenya's sustainable future. The potential benefits are clear: reduced pollution, enhanced energy independence, and economic resilience.
The legacy automobile industry’s resistance to e-mobility is understandable but ultimately shortsighted. Local assembly of fossil-fuel vehicles undoubtedly creates jobs and economic activity. However, these gains are outweighed by the long-term costs of continued fossil fuel imports, which drain foreign exchange reserves and perpetuate energy dependency. The argument that e-mobility threatens local jobs overlooks the potential for new job creation within the electric vehicle ecosystem, from assembly and maintenance to the expansion of renewable energy infrastructure.
When comparing the Finance Bills of 2023 and 2024, several aspects suggest that the latter may be less favourable for the EV industry.
The 2024 Bill proposes an excise duty rate of 10 per cent for EV buses, higher than the previous year's rate. This increase could raise the overall cost of electric buses, making them less competitive against traditional internal combustion engine (ICE) buses.
Secondly, the 2024 Bill includes a VAT rate of 16 per cent for EV buses. While the 2023 Bill's VAT specifics are not detailed, if it offered more favourable VAT treatment or exemptions, the new bill's provisions could be seen as a setback.
Third, unlike the 2023 Bill, which may have included targeted incentives to promote EV adoption, the 2024 Bill appears to lack new specific incentives or tax breaks for the sector.
Lastly, the 2024 Bill introduces changes to legal notices and localization requirements, creating uncertainty that could impact the EV bus industry. This uncertain regulatory environment can hinder the sector's growth.
The policy reversal in the 2024 Finance Bill contrasts sharply with the previously unified support from various ministries, which recognized e-mobility as vital for Kenya's sustainable future. The legacy automobile industry’s resistance, driven by concerns over job losses and economic impact, has influenced these policy changes. However, this perspective overlooks the long-term benefits of e-mobility, such as reduced pollution, enhanced energy independence, and economic resilience.
Economic and environmental considerations
The economic case for e-mobility is compelling. For instance, a locally assembled diesel bus consumes around KSh 20 million worth of imported fuel over eight years, whereas an electric bus would require about KSh 9 million of locally generated electricity. This shift keeps more money within the local economy and supports national energy providers.
The adoption of EVs is poised to create significant employment opportunities in Kenya over the next few years. The EV ecosystem encompasses various sectors, including assembly, maintenance, battery recycling, and charging infrastructure development. Encouraging local assembly over high local manufacturing requirements can create immediate job opportunities and build the foundation for a robust local industry. These jobs span from skilled labour in assembly plants to technical roles in maintenance and service stations.
Moreover, the transition to e-mobility can stimulate new industries and services. The development of charging infrastructure will require electricians, engineers, and technicians. Battery recycling and disposal will open up new sectors within the waste management industry. The ripple effect of these developments can lead to a more diversified and resilient economy.
Challenges of high taxes
High taxes on EVs, including import duties, excise duties, and VAT, drive up costs and discourage their adoption. This is particularly detrimental for electric buses, which serve a large portion of the population.
The Kenya Institute for Public Policy Research Analysis (KIPPRA) highlights the crucial role of the public transport sector in Nairobi's economic growth, with 58.7 per cent of residents relying on public service vehicles to commute. High costs for EV buses hinder their adoption, which in turn impacts the daily lives of millions who depend on public transportation.
Currently, Kenya lacks a conducive environment for local manufacturing of EVs. Therefore, the focus should be on encouraging local assembly. This approach allows for immediate adoption of EV technology while building the capacity for future manufacturing. Local assembly benefits from lower capital investment requirements compared to full-scale manufacturing, making it a practical and strategic step in developing the EV industry.
Ultimately, the true measure of "building Kenya" lies not in the vehicles we assemble, but in the sustainable future we create for generations to come.
The writer, Moses Nderitu, is the Managing Director of BasiGo Kenya.
The Standard Group Plc is a multi-media organization with investments in media
platforms spanning newspaper print operations, television, radio broadcasting,
digital and online services. The Standard Group is recognized as a leading
multi-media house in Kenya with a key influence in matters of national and
international interest.
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