By George M Song’e
It has been almost four years since the first electric motorcycles hit the streets of Nairobi. Since then, many start-ups in the e-mobility space have chosen to ride with the two-wheelers to gain traction in the market.
The two-million-strong boda boda space is a natural attraction. This coupled with the relatively lower capital investment has resulted in many companies taking the lead in helping Kenya achieve its net zero target.
Unfortunately, e-mobility companies cannot fully take advantage of the incentives under the East African Community Duty Remission Scheme, due to the skewed legal requirements in LN 112 (Tax Procedures Unassembled Motorcycles Regulations, 2020)
The tax procedure requires an assembler to have a bonded warehouse. Getting a customs-bonded warehouse licensed is a long process that can take months. It is expensive and not cost-effective for small businesses.
The law should allow assemblers to store their CKDs (completely knocked-down-kits) in third-party bonded facilities and transfer them to assembly plants after payment of taxes.
Further, the law requires that the assembly line is based in the same bonded facility. This forces anyone who wants to assemble motorcycles locally to own a bonded plant.This calls for a huge investment.
The same does not apply to assemblers of buses and other vehicles. It is discriminatory and locks out small businesses that are interested in assembly as a non-core business function.
Contract manufacturing should be embraced for the industry to grow. To reap the benefits of the duty remission scheme, the law requires an assembler to source for specific parts within the East African Community markets.
This supports the growth of local parts manufacturing. The parts listed in the legal notice are specific to ICE motorcycles. This automatically locks out the electric motorcycle suppliers from the scheme. This reduces the electric motorcycle companies to traders who add no value to our nation’s industrialisation agenda
The 2023 Finance Act incentivised the electric motorcycle industry, the ripple effect was a rise in the number of electric motorcycles on our roads. The current market share of four percent can be buoyed by an amendment of LN112 thus creating opportunities for more competition.
Data from the Kenya National Bureau of Statistics shows a slump in the volume of registered motorcycles from 285,203 in 2021 to 131,513 in 2022. The 2023 figure stood at 70,691 units.
In 2023 the Lusaka Road-based Car and General Trading Company reported a 77 percent drop in monthly sales of their flagship TVS brand from 20,000 units to 4,000 units. The reduction in numbers is attributed to low consumer purchasing power, coupled with the narrow consumer profit margins due to the escalating fuel prices.
Assembly lines are operating below capacity. This idle capacity is not sustainable and presents a risk of job losses.
Further, local part suppliers have experienced reduced activity due to the assembly slowdown. This has affected their business performance. Embracing electric motorcycle assembly through contract manufacturing will alleviate these pains.
On their part, electric motorcycle companies should expand beyond the cities. This will allow a broad spectrum of citizens to interact with the new technology, the effect will be increased education and social acceptance.
The writer in an e-mobility champion
This article was first published in the Business Daily
Wow. I am surprised that such a regulation exists
it doesn’t make sense