Electric motorcycles, buses and related green energy equipment will continue enjoying tax relief after lawmakers turned down a Treasury proposal that could have pushed up prices and slowed down Kenya’s growing electric mobility industry.
The National Assembly, through its Finance Committee, has backed the retention of zero-rated value-added-tax status for electric motorcycles, electric bicycles, electric buses, solar batteries and lithium-ion batteries in the 2026 Finance Bill review.
The decision keeps the products taxed at zero percent VAT, meaning no tax is added on sale, a move aimed at keeping them affordable and supporting local production.
In its report, the committee pointed out that the tax relief was only introduced recently under the Finance Act, 2023, to encourage local assembly and investment in the electric vehicle space. It cautioned that removing it would disrupt progress in the sector and weaken confidence among investors.
The National Treasury had proposed moving the products from zero-rated status to VAT-exempt status. Although both categories do not charge VAT on final goods, the proposed shift would have stopped local manufacturers from claiming refunds on VAT paid for imported parts and raw materials used in production.
This change would have affected firms such as BasiGo, Roam, Spiro and Arc Ride, which rely on VAT refunds to reduce production costs for locally assembled electric vehicles. Under the current arrangement, companies are able to recover input VAT from the Kenya Revenue Authority, making local assembly more competitive than importing fully built units.
Industry estimates show the proposed shift could have raised the price of an electric motorcycle by up to Sh46,000, increased electric minivan costs by about Sh1.1 million, and pushed electric bus prices higher by more than Sh2.5 million. The added costs, according to sector players, would have slowed adoption of electric transport across the country.
The proposal faced strong resistance from electric mobility companies, who argued it would reverse gains made in building Kenya as a regional hub for clean transport. They also warned that the ripple effects would be felt across local supply chains, especially firms producing metal and fabricated parts used in vehicle assembly.
“It is a shocking proposal, given the support we have had from the government,” Moses Nderitu, BasiGo Kenya managing director and vice president of the E-Mobility Alliance of Kenya, previously told the Business Daily.
Kenya has in recent years attracted major investment in electric mobility, with several firms setting up assembly plants to serve both local and regional markets. However, industry leaders have consistently raised concern over shifting tax policies, saying they make long-term planning difficult in a sector that requires heavy upfront investment.
The Finance Committee’s recommendation now preserves the existing incentives for electric mobility ahead of the next financial year. The National Assembly has already passed the 2026 Finance Bill with all committee amendments adopted, and it now moves to President William Ruto for assent before becoming law.