Kenya is planning to introduce a 16% value added tax (VAT) on electric vehicles, lithium-ion batteries, and electric bicycles, in a move that would reverse earlier tax breaks that supported the country’s electric mobility sector.
The proposal is contained in the Finance Bill 2026. If approved, it would increase the cost of importing electric vehicles, electric buses, batteries, and other key parts used in the growing electric transport industry.
The change comes at a time when electric mobility companies in Kenya still rely heavily on imported equipment. A 2025 industry study found that almost all inputs used to build electric vehicles in the country are imported. This leaves companies exposed to foreign exchange fluctuations, shipping costs, and import duties.
The proposed VAT increase could therefore raise operating costs for firms working in the sector, including companies such as BasiGo, Roam, and Ampersand, which are building electric buses, motorcycles, and battery-swapping networks across Kenya and the wider East African region.
Kenya has become one of East Africa’s leading markets for electric mobility in recent years. This growth has been supported by tax incentives that made it cheaper to import electric vehicles and related components, helping startups expand public transport electrification and charging infrastructure.
The country’s electricity system has also supported the shift. Government and energy data show that more than 90% of Kenya’s electricity comes from renewable sources such as geothermal, hydro, wind, and solar power, making electric charging relatively cleaner compared to many other countries.
Government forecasts suggest strong future growth in the sector. Electric vehicle sales in Kenya are expected to rise from about 2,700 units in 2023 to around 70,000 units by 2030. This growth is expected to be driven by better charging systems, battery swapping networks, and continued investment from both startups and larger operators.
The Finance Bill 2026 does not give a clear reason for removing the VAT exemption. However, the tax changes are part of wider reforms affecting digital services, software, mobile phones, and virtual asset providers. The government says these measures are aimed at increasing domestic revenue collection.
The proposal has added to a wider discussion across Africa about how governments can increase tax revenue while still supporting industries linked to clean energy, transport innovation, and long-term economic development.
