In 2020 a short video went round on social media showing a Tesla Model Y the first-ever of its kind to be spotted in Kenya. The question that arose in most people’s mind was, where will the car be charged? Climate Change has brought the urgent need for countries to reduce their carbon footprint. Consequently and with this urgency, one of the sectors that countries have identified as having a great potential to grow a country’s economy and still reduce their carbon emission is the transport sector. This will be achieved by embracing the use of electric-powered vehicles commonly referred to as (EVs).
Governments in various parts of the world have embarked in setting up laws and regulations to ensure that their citizens adopt the manufacture and sale of EVs. For instance, the European Union has passed resolutions that contain stiff penalties for vehicle manufactures whose cars emit carbon emissions beyond 95g/km. European countries like Norway offer tax incentives that include; exemption from purchase or import taxes for EVs, exemption from the 25% VAT on the purchase of EVs, exemption from annual road tax, and having EV owners pay a maximum of 50% of the total amount on toll roads. China which is the industry leader when it comes to adoption of EVs has put several policies that encourage the adaptation of EVs which include; requiring vehicle manufacturers and importers to dedicate at least 10% of their vehicle output to be EVs, tax incentives on the manufacturing, importing and buying of electric vehicles, supporting of electric vehicle charging infrastructure as a government policy supported by the China State Grid and China Southern Grid, China’s two state-owned electric utilities and government agencies have started procuring EV vehicles. The results of these have been in Norway, the sale of EV cars surpassed 50% of the total sale of cars in the country in 2020. China, on the other hand, has the world’s largest infrastructure of EV charging stations, it is also the fastest-growing market for EVs. This has led to EV companies such as Tesla setting up a state of the art manufacturing factory in China.
Kenya has the potential of becoming an industry leader in the EV market in Africa. According to a report done in 2019 by the Ministry of Transport, Infrastructure, Housing, Urban Development & Public Works on Electric Mobility in Kenya, the country has the capacity to adapt to EVs. Firstly, Kenya produces more power than we consume and this power can be used to power EVs. According to the report, Kenya produces 2700 MW, out of which over 80% is renewable, against the demand of 1860 MW. The excess of about 800 MW could be utilized to power an electric transport fleet. Further, Kenya already has companies like Nopia ride and Opibus that demonstrate the potential of EVs in Kenya. During the Fourth UN Environmental Assembly held in March 2019, Kenya launched its first electric mobility pilot program in Kisumu County. Currently, research is being conducted by Ms Edna Odhiambo on the potential viability of deploying EV Mini-Buses in Nairobi, Cairo and Cape Town. Further, companies like Ken Gen are planning to set up infrastructure for EV charging stations. In contrast however, with all these developments Kenya’s laws and policies appear not to be in alignment with the potential that the EV industry can contribute to the Kenyan Economy.
To expound on the contrast, when it comes to manufacturing of EVs Kenya does not have laws and policies for the manufacturing of cars in general. Therefore, how does one even start manufacturing EVs? This revelation became clear when the manufactures of the Laikipia BJ-50 tuk-tuk tried to get it approved for Mass production and encountered several legal handles. This is because Kenyan laws never envisioned Kenya as a manufacturer of vehicles; they envisioned the country as an importer of vehicles. Currently, the only regulation in Kenya that attempts to support the production of EVs in Kenya is the Battery-electric mopeds and motorcycles-Performance-Part 1: Reference energy consumption and range standard. The standard was developed by the Kenya Bureau of Standards.
The second challenge is the lack of tax incentives to promote the manufacture and sale of EVs in Kenya. One of the main reasons EV uptake is succeeding in other countries is the tax incentives that are offered to the EVs industry in those regions. This can be seen with the success stories in Norway and China. For Kenya these tax incentives can range from having tax incentives on the manufacture of batteries in Kenya, manufacturing or assembly of the cars, importing of the cars and installation of EV infrastructure. Currently, the only tax incentive that has been implemented is the reduction of Excise duty under the Finance Act 2019 from 20% to 10% on the importation of EVs. However, all the other taxes that come with the importation of cars still apply to EVs including; Value Added Tax (16%), Import Declaration Fees (2%), Railway Development Levy (1.5%) and Import Duty (25%).
Another setback for EVs in Kenya is the lack of policies on the development of EV charging infrastructure as seen in the Chinese case. One of the reasons EVs are succeeding in China is because the government has set up laws and regulations that support the development of EV Infrastructure. The rules should not only be for government entities setting up EV infrastructure they should also create a public-private partnership framework. This will enable private companies to take part in the development of this infrastructure and promote competition in the market. These regulations should highlight how EVs charging points would be installed in residential areas.
Even though Kenya passed the Climate Change Act and has rules regarding the restriction on importation of second hand cars that ban the importation of cars below 8 years, these rules are not as stringent like the European Union ones that cap the amount of carbon emission vehicles are allowed to emit. Some countries have also introduced a carbon tax to discourage the use of vehicles that emit high levels of carbon into the air. These rules have encouraged manufacturers and buyers of vehicles to be environmentally conscious and to adopt EVs which attract little to no carbon tax. In Kenya, because we lack stringent rules on carbon emission, vehicle manufactures and vehicle buyers are not incentivised to switch to EVs.
Further, with the introduction of carbon emission rules and fines countries have also introduced carbon credit systems. According to Investopedia, this is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of a mass equal to one ton of carbon dioxide. The advantage of this is that car manufactures are duly incentivized to reduce greenhouse emissions. First, they will be fined if they exceed the carbon emissions cap. Second, they can make money by saving and reselling some of their emissions allowances. An example of a company that has benefited from this concept immensely is Tesla. It made about $428 million in the last quarter of 2020 from selling carbon credits. This is something Kenya can consider introducing to attract investors in this industry.
In conclusion, the Kenya EV market has great potential. The market is already there, further with the passing of AFCTA Kenya can take advantage of this and be a lead manufacturer and exporter of EV cars to other African countries. However, just like the way the government allowed the introduction of Fintech by having policies that encouraged them to thrive and thus leading to success stories like M-pesa. With the right policies, Kenya has a great potential of being an EV leader not only in Africa but the world.
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