Kenya President William Ruto arriving at the Africa Climate Summit after driving himself from State House in an Autopax Air EV Yetu. Image courtesy of Citizen TV on X.

Dynamics of Electric Mobility Transition in Kenya

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George, a delivery executive, lives in a modest home on the outskirts of Nairobi. He unplugs the wire that charges his shiny new electric bike, presses a tiny switch bringing the quiet motor to life, and rides off to deliver happiness in the form of food. George is part of a large cohort of gig-economy workers who swear by this innovation. They feel that while it has a relatively high upfront cost, various leasing and pay-as-you-go models make ownership easier. Moreover, the e-bike saves time otherwise wasted in queues at petrol stations since the “e-juice” is now available at home, which means an increased take-home pay. A few also take pride in the fact that it is good for the environment. While there are multiple transitional challenges, most giggers seem happy with Kenya’s mobility transition.

Kenya is rapidly emerging as the East African e-mobility leader amid the bourgeoning electric vehicle (EV) market on the continent. With President Ruto’s endorsement during the last Africa Climate Summit, where he drove an EV to the venue, the Kenyan EV ecosystem has made rapid strides. The government has been making the right moves to increase EV adoption in Kenya, especially in the gig-economy and commercial fleet segment.

The government has taken a multitude of initiatives over time to encourage EV adoption and to bring private sector companies to Kenya. The country has set a target for 2025, aiming for 5% of all new vehicle sales to be EVs. Further, as Kenya is currently dependent on imports for EVs, the government has reduced the excise duty rate from 20% to 10% for fully electric vehicles. A preferential retail electricity tariff of 17 KShs/kWh for charging EVs has been proposed while plans have been put in place for commercial buildings to allocate at least 5% of parking space to EVs. In August 2023, the Kenyan government also set up a 15-member team to develop a dedicated e-mobility policy, the draft of which has now been opened to the public for opinions. A key highlight of the policy is to transform Kenya into an e-mobility manufacturing hub.

The Kenyan EV market, however, has multiple challenges. The opening of the market has led to heavy competition. According to latest estimates, upwards of 40 two-wheel EV companies are operating in Kenya, leaving little breathing space. This also ties in to the less than ambitious target for EVs, which does not provide enough “skin in the game” for EV companies. The government support, therefore, must be greater than only reduction in import duties to make the EV economics viable for customers. A more ambitious target will provide enough scale for private companies to achieve better profit margins, ensuring their longevity in the market.

Currently, the market is in strong overdrive, typical of the growth stage. The government has also responded positively with the introduction of the policy framework, thereby exhibiting a constructive intent. As the market will inevitably begin to plateau in the next five years, especially in the two-wheel EV segment, we will see the market evolve within multiple tangents and consequences. We can expect an interesting supply-side consolidation as the current targets, the given scale, and the number of market participants do not align. The market will correct the number of players, bringing it down significantly from the present 40+ companies, until those with deeper pockets and sheer resilience survive.

Further, there will be a strict EV economics correction. At present, the product prices are arbitrary, with a perception of being higher for the customers and providing ludicrous margins for companies. Moving forward, the market forces will find a way to stabilise the economics, in favour of the demand-side.

As the EV market grows, it will move from being a supplier’s dream (small market with fewer options) to a heavy demand orientation. With all the different supply options available, ultimately the consumers will decide which of these will stay and which will perish. The demand will mostly focus on customer needs and value-added services, determining the supply-side survivors.

The Kenyan EV space has become extremely dynamic. Moving forward, policies, capital, and demand will act as the engine, battery, and accelerator, respectively, of the vehicle of mobility transformation. George and his cohort are already happy. And incoming policies, market evolutions, and market-led economic corrections will eventually put more money into their pockets and bigger smiles on their faces.

By Ashay Abbhi, Manager, Climate Change, Intellecap


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