Strategy and consulting multinational McKinsey has been commissioned to conduct a cost-benefit analysis for Kenya’s transition from internal combustion engine vehicles to electric vehicles.
This is according to a letter from the Electric Mobility Taskforce Chairperson, Daniel Ngumy to Transport Cabinet Secretary Kipchumba Murkomen dated May 8.
The letter indicates that the task force should be submitting proposals for tax changes aimed at catalysing the uptake of electric mobility in Kenya, proposals that are likely to see the exchequer take a hit from a tax revenue standpoint.
Through Finance Act 2023, the government introduced fiscal incentives for e-mobility including the zero-rating of Value Added Tax on electric vehicles and components such as solar and lithium-ion batteries and electric buses effective July 1, 2023. The Act also slashed the excise duty rate on e-mobility components from the initial 20 percent to 10 percent.
The study commissioned by the task force is being financed by the UK's Foreign, Commonwealth and Development Office (FCDO).
“...there is the need for a development of a financial model which will assess the cost-benefit analysis for Kenya to transition over time from Internal Combustion Engine Vehicles to Electric Vehicles," Ngumy’s letter to the CS states.
"A study has been commissioned by the Taskforce to be undertaken by McKinsey, funded by FCDO. FCDO has committed to provide support through the e-Mobility Taskforce to the completion of the assignment."
According to data from the Energy and Petroleum Regulatory Authority (Epra), Kenya closed December 2023 with 3,753 registered electric vehicles, 2,694 of which were registered in 2023 in what the market regulator has attributed to the adoption of a specialized electricity tariff effective April 1, 2023 at Sh16 per unit of consumption.
Kenya targets at least five percent of all registered vehicles to be electric by 2025 up from 1.6 percent in 2023.
