Kenya plans to extend the standard 16% valued added tax (VAT) to electric vehicles (EVs), lithium-ion batteries, and electric bicycles, reversing tax breaks that supported the country’s electric mobility industry.
The proposal, contained in the Finance Bill 2026, could increase the cost of imported batteries, electric buses, and related components in a market where startups like BasiGo, Roam, and Ampersand are expanding operations across public transport and battery-swapping infrastructure.
The proposed VAT changes come as electric mobility firms continue to rely heavily on imported batteries, vehicles, and charging equipment. A 2025 industry study found that “all or almost all inputs for EVs are imported,” exposing the sector to foreign exchange costs, shipping charges, and import taxes.
Kenya has emerged as one of East Africa’s most active electric mobility markets in recent years, partly helped by tax incentives that lower the cost of adopting electric vehicles and batteries.
Kenya has also become one of Africa’s busiest electric mobility markets, with government investment data projecting annual EV sales could rise from 2,700 units in 2023 to 70,000 by 2030, supported by battery-swapping networks, charging infrastructure, and EV startup expansion across East Africa
Industry operators have increasingly turned to Kenya as a regional base for expansion because of the country’s electricity supply, with government and energy sector data showing more than 90% of Kenya’s electricity generation comes from renewable sources, including geothermal, hydro, wind, and solar.
The Finance Bill does not provide reasons for removing the VAT relief. The proposed changes are part of broader amendments affecting digital services, software, mobile phones, and virtual asset providers as the Treasury seeks to expand domestic revenue collection.
The proposed amendments add to a broader debate across African markets about how governments can widen tax collection while still supporting investment in sectors tied to climate transition and industrial growth.
