Why electric vehicle firms are lining up to assemble in Kenya

An electric bus belonging to BasiGo.

Photo credit: Pool

Players in the electric vehicle industry are lining up to assemble in Kenya, seeking to take advantage of tax incentives offered by the government to accelerate industrialisation and growth of clean transport.

The firms have sought partnerships with two local assemblers –Thika-based Kenya Vehicle Manufacturers (KVM) and Associated Vehicle Assembler (AVA) in Mombasa.

KVM is the latest to be awarded the contract to assemble Roam’s first fully electric shuttle bus dubbed Roam Move.

Roam’s competitor BasiGo had earlier partnered with AVA to assemble its buses.

Players say more electric vehicle firms are planning to assemble their models locally in the near to medium term to benefit from lower taxes.

“We have received increased interest from more electric vehicle companies who want to assemble locally,” said Dinesh Kotecha, the chief executive of Simba Corp which owns Mombasa-based AVA.

He added that the parties are at various stages of negotiations on the assembly contracts.

Electric vehicles assembled in the country are exempt from the 25 percent import duty on such models that are shipped in fully built from overseas, dealers told Business Daily.

They are also shielded from the 25 percent excise duty that applies to fully-built imports.

The two tax incentives are designed for firms that ship in completely knocked down (CKD) parts and take them to the assembly plants where they are put together using components such as tyres that are sourced locally.

Through the tax incentives, firms assembling their models locally can have a price advantage over those importing vehicles.

This can help them grow sales besides giving them an opportunity to enjoy higher margins.

Fully built electric vehicles are taxed lower than those running on diesel or petrol, signalling the government’s policy of incentivising the transition to clean transport.

The import duty on fully built vehicles with internal combustion engines is set at a higher rate of 35 percent.

Besides vehicles, tax incentives have also been offered to assemblers of electric motorcycles to encourage their local production.

“Completely knocked down (CKD) is duty-free, and if it’s electric it’s VAT exempt, which is a big difference,” said Vijay Gidoomal, the chief executive of Car & General.

In its 2023 Budget Policy Statement, the Treasury highlighted plans to roll out electric vehicle charging infrastructure with the view to anchoring the mass adoption of electric mobility in the country.

Already, State-owned enterprises including Kenya Power and KenGen have set their sights on e-mobility by partly switching their fleets to electric vehicles while setting up their charging stations.

The switch to electric vehicles is driven by concerns about pollution from the use of petroleum fuels and the projected depletion of the commodities.

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