Kenya is promoting electric mobility to cut fuel imports, reduce emissions and create green jobs, but proposed VAT changes in the Finance Bill 2026 could make electric motorcycles, buses, bicycles and lithium-ion batteries more expensive.
Kenya’s plan to accelerate electric mobility is facing a fresh policy test after the Finance Bill 2026 proposed tax changes that could raise the cost of electric motorcycles, electric buses, electric bicycles and lithium-ion batteries.
The proposal comes barely months after the government launched the National Electric Mobility Policy, presenting electric transport as a major pillar in reducing fuel imports, cutting emissions, creating green jobs and modernizing the transport sector.
Speaking during the launch of the policy at the Kenyatta International Convention Centre in February, Roads and Transport Cabinet Secretary Davis Chirchir said electric mobility was not just an environmental option, but an economic necessity.
“Electric mobility is no longer optional,” Chirchir said, describing it as “a strategic necessity for Kenya’s economic resilience and environmental sustainability.”
At the same event, the ministry said Kenya had registered 39,324 electric vehicles by 2025, up from 1,378 in 2022, representing growth of more than 2,700 percent in three years. Chirchir said the boda boda category had recorded the highest increase, driven by more affordable electric products and asset-financing models targeting the e-mobility sector.
But the Finance Bill 2026 now appears to pull in a different direction.
According to KPMG’s analysis of the Bill, Treasury is proposing to move several e-mobility products from the zero-rated VAT category to the VAT-exempt category. The affected items include electric motorcycles, electric bicycles, solar and lithium-ion batteries, and electric buses.
The difference may sound technical, but it is central to the cost of electric mobility.
Under zero-rated VAT, the final product attracts VAT at zero percent, while manufacturers, assemblers and importers can still claim refunds on VAT paid on inputs.
Under VAT-exempt status, the consumer may not see VAT directly charged on the final product, but businesses cannot recover VAT paid on inputs such as parts, assembly materials, batteries, logistics and services.
KPMG warns that exemption may look like relief at the point of sale, but “it often increases the overall cost of goods” because producers cannot claim VAT on their inputs.
That cost may eventually be passed to buyers, including boda boda riders, public transport operators and companies investing in electric mobility.
The proposed shift has created a policy contradiction. In 2025, the government promoted incentives for electric mobility, including zero-rating of VAT on electric buses, electric bicycles, electric motorcycles and lithium-ion batteries, as well as reduction of excise duty to zero percent on electric bicycles, electric motorcycles and lithium-ion batteries.
Now, the Finance Bill 2026 is proposing to reduce the value of some of those incentives at a time when Kenya is still trying to grow the sector.
The Ministry of Roads and Transport says the National Electric Mobility Policy is meant to decarbonize the transport sector, reduce greenhouse gas emissions, improve air quality, strengthen energy security and create green jobs.
Chirchir said the policy would help Kenya unlock the potential of electric mobility to “create green jobs and drive inclusive economic growth.”
The ministry also linked the shift to Kenya’s fuel import burden. According to Chirchir, Kenya’s annual petroleum import bill is estimated at about US$5 billion, placing pressure on foreign exchange reserves, energy security and exposure to global fuel price volatility.
For ordinary Kenyans, the biggest question is whether the proposed VAT change will make electric boda bodas less affordable.
Electric motorcycles have been marketed as cheaper to operate than petrol-powered bikes, especially where riders can access battery-swapping services. But if purchase prices rise, many boda boda riders may delay the shift, particularly those who rely on credit, asset financing and daily repayment models.
The proposal could also affect local assemblers and e-mobility startups that have invested in Kenya’s growing electric transport market. Many of them have depended on tax incentives to lower production costs and compete with cheaper petrol motorcycles and second-hand vehicles.
As Parliament considers the Finance Bill, the emerging question is whether Kenya can raise more tax revenue without weakening a sector it has publicly identified as central to climate action, industrial growth and transport modernization.
For now, Kenya wants more electric vehicles on the road, but its proposed tax treatment may make them more expensive to buy.
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