Kenya is planning to introduce a 16 percent value added tax on electric vehicles, lithium ion batteries and electric bicycles, a move that could significantly raise costs and slow momentum in one of Africa’s fastest growing clean transport markets.
The proposal is contained in the Finance Bill 2026 and represents a major policy shift that would reverse earlier tax incentives that had helped stimulate electric mobility adoption across the country.
If implemented, the new tax would affect electric buses, motorcycles, passenger cars and supporting infrastructure, placing additional financial pressure on companies operating in the sector.
Industry players say the measure could hit firms such as BasiGo, Roam and Ampersand, which have been at the forefront of developing electric buses, motorcycles and battery swapping systems across East Africa. These companies rely heavily on imported vehicles, batteries and components, making them particularly sensitive to changes in taxation and import duties.
Kenya has in recent years positioned itself as a regional leader in electric mobility, supported by its strong renewable energy base. More than 90 percent of the country’s electricity is generated from renewable sources, including geothermal, hydro, wind and solar power. This has made electric transport more environmentally attractive compared to fossil fuel powered alternatives.
The country’s EV market has also benefited from government policies aimed at reducing emissions and lowering fuel import dependency. As a result, adoption has been growing steadily, especially in urban transport and delivery services.
However, the proposed VAT could challenge these gains by increasing upfront costs for consumers and operators. Many electric mobility businesses in Kenya depend on imported technology, meaning they are already exposed to foreign exchange fluctuations, shipping costs and existing import taxes.
A 2025 industry assessment noted that nearly all electric vehicle inputs in the region are imported, highlighting structural vulnerabilities in supply chains and the lack of local manufacturing capacity for batteries and EV components.
Government projections previously estimated that electric vehicle sales could rise from about 2,700 units in 2023 to around 70,000 units by 2030, driven by expanding charging networks and the gradual electrification of public transport fleets.
The Finance Bill 2026 also introduces broader tax adjustments targeting digital services, software platforms, mobile phones and virtual asset providers, as the government seeks to increase domestic revenue collection amid fiscal pressures and rising public debt.
Officials have not publicly detailed the specific rationale for removing VAT exemptions on electric mobility products, a decision that has sparked debate among industry stakeholders and climate advocates.
Critics argue that taxing electric vehicles could undermine Kenya’s long term climate and energy transition goals, especially at a time when many countries are encouraging clean transport adoption to reduce carbon emissions and improve urban air quality.
Supporters of the broader fiscal reforms say governments must balance environmental priorities with revenue generation needs, particularly in economies facing budget deficits and increasing infrastructure demands.
Across Africa, countries such as Rwanda and Morocco have maintained incentives to support electric mobility growth, positioning themselves as emerging hubs for clean transport innovation.
The policy shift in Kenya is therefore being closely watched as a potential test case for how African governments reconcile short term fiscal pressures with long term sustainability and industrial development goals.
