Kenya to give EVs road toll discounts

From the newsletter

Electric vehicle owners will be given discounts in Kenya when the country enacts its National Tolling Policy. The policy, which is currently undergoing public participation, seeks to introduce toll charges on major roads to fund road maintenance and rehabilitation. The discounts on EVs is part of Kenya’s efforts to promote the shift to clean mobility solutions.  

• Tolls will be a major shift in Kenya as motorists will now pay to use major highways based on their usage. By giving discounts to EVs, it is expected that it will encourage more Kenyans to shift from fuel vehicles, which will pay full tolls and will therefore be more expensive to operate. 

• This policy is however a double-edged sword for EV adoption as it will discourage vehicle ownership in general. Tolls will amount to double taxation as Kenyans are already taxed to pay for road maintenance and rehabilitation. 

More details

• Introduction of the tolls is part of the Kenyan government’s efforts to unlock alternative funding sources for road maintenance due to declining revenue from the Roads Maintenance Fuel Levy (RMFL), a levy charged on fuel, partly attributed to the growing popularity of EVs and fuel-efficient vehicles.

• Kenya’s tolling policy will apply to various road types, including newly constructed and improved roads. An advanced vehicle identification and registration system, using automatic number plate recognition, will be implemented for toll collection.

• Enactment of the policy will however not be easy as opposition is mounting from various interest groups, particularly public service vehicle operators. Critics argue that road tolls will make the cost of transport go up, which will dent Kenya’s fledgling economy.

• While tolls will be an additional cost to both fuel vehicles and EV users, giving EV users discounts will give them a double advantage as they also do not pay the fuel levy. The Minister for the National Treasury will gazette the initial toll charges (and discounts to EV users) and will update them quarterly to reflect inflation, exchange rates, tax adjustments and economic growth.

• Kenya’s approach contrasts with what other countries on the continent such as South Africa are doing to take care of their revenue interests. South Africa is considering a special tax on EVs to plug the revenue shortfalls as a growing number of its citizens ditch fuel vehicles. Last year, the country launched a survey to gauge public opinion on proposed charges on EVs.

• In the US, 24 states impose a higher annual vehicle registration fee for EVs and some hybrid vehicles to help offset forgone fuel tax revenue. Further, due to the fact that EV's are generally heavier than ICE vehicles, there is increased wear and tear on roads. Some locations are looking at implementing fees based on vehicle weight. 

Our take

• Kenya has for long tried to introduce road tolls but has failed due to intense public opposition. The government appears to have more momentum this time, which could finally see the tolls introduced. However, we could see it give some concessions, including implementing the tolls in phases to ease the blow to motorists. 

• Lower tolls for EVs are unlikely to last long should adoption of EVs rise significantly considering Kenya’s tight fiscal space amid a ballooning debt burden and below-par revenue collection. The Minister will be adjusting the tolls every three months, meaning we will see frequent changes in the rate. 

• In the long term, we could see Kenya and other African countries introducing a specific EV registration fee, similar to the US model to offset lost fuel taxes revenue. We could also see the introduction of weight-based models of tolling applicable to both ICE vehicles and EVs.