Kenya Plans Tax Shift for Electric Mobility Sector

Kenya is reversing tax incentives that helped grow its electric vehicle (EV) industry by extending a standard 16% value-added tax (VAT) to imports of EVs, lithium-ion batteries, and e-bikes. The proposal outlined in the Finance Bill 2026 could significantly increase costs for companies like BasiGo, Roam, and Ampersand that are expanding across East Africa’s public transport and battery infrastructure.

The shift comes as Kenya has become one of the region’s most active EV markets, supported by earlier tax breaks. A 2025 industry study found that virtually all inputs for EVs in Kenya are imported, exposing businesses to foreign exchange volatility and shipping expenses.

Industry data projects annual EV sales could rise from 2,700 units in 2023 to 70,000 by 2030, fueled by expanding battery-swapping networks, charging infrastructure, and startup growth. Kenya’s appeal as a regional hub is bolstered by its renewable energy grid, which generates over 90% of electricity from sources like geothermal, hydro, wind, and solar.

The Finance Bill doesn’t explain the rationale for removing the VAT relief, but the changes align with broader efforts to expand domestic revenue collection. Other digital services, software, mobile devices, and virtual asset providers will also be affected by the proposed amendments.

This policy shift raises questions about how African governments can balance widening tax bases with supporting investment in climate-friendly industries and industrial growth.