Kenya plans 16% VAT on electric vehicles in setback for Africa’s EV industry

Kenya plans to impose a 16% value-added tax (VAT) on electric vehicles, lithium-ion batteries and electric bicycles, a policy shift that could raise costs for consumers and slow the growth of one of Africa’s most active clean transport markets.

• Kenya plans to introduce 16% VAT on electric vehicles and lithium-ion batteries
• The move could raise costs for East Africa’s fast-growing electric mobility industry
• EV firms in Kenya still depend heavily on imported batteries and vehicles
• The proposal comes as African governments balance climate goals with pressure to raise tax revenue

The proposal, included in the Finance Bill 2026, would remove tax incentives that have helped electric mobility companies expand rapidly across East Africa in recent years.

The move is expected to affect companies such as BasiGo, Roam and Ampersand, which have invested heavily in electric buses, motorcycles and battery-swapping infrastructure in Kenya and neighbouring countries.

Industry players say the proposed VAT could significantly increase operating costs in a sector that still relies heavily on imported vehicles, batteries and charging equipment.

A 2025 industry study found that “all or almost all inputs for EVs are imported,” exposing operators to exchange-rate volatility, shipping costs and import-related taxes.

Kenya has become one of Africa’s leading electric mobility markets partly because of earlier government incentives designed to lower the cost of adopting electric transport.

Government projections estimate annual EV sales could rise from about 2,700 units recorded in 2023 to around 70,000 units by 2030 as charging networks expand and public transport operators gradually switch from fuel-powered vehicles.

The country has also attracted electric mobility investment because more than 90% of its electricity comes from renewable energy sources, including geothermal, hydro, wind and solar power.

This has helped position Kenya as a regional hub for companies targeting Africa’s growing demand for cleaner and cheaper urban transport.

The proposed tax changes come as Kenya intensifies efforts to raise domestic revenue amid growing fiscal pressure and high public debt obligations.

The Finance Bill 2026 also includes wider tax measures targeting digital services, software, mobile phones and virtual asset providers.

The bill does not explain why the VAT exemptions for electric mobility products are being removed.

The proposal is likely to fuel wider debate across African markets over whether governments should prioritise immediate tax revenue or continue offering incentives to sectors linked to industrial growth, energy transition and climate goals.

Several African countries, including Rwanda and Morocco, have continued to promote electric mobility through incentives aimed at reducing fuel imports and transport emissions.

Kenya’s proposed policy reversal could therefore become an important test case for Africa’s broader clean transport ambitions.