Questions on electric vehicle industry as State pushes uptake

President William Ruto using electrical vehicle on way to the ministerial conference of the Africa Climate Summit at Kenyatta International Convention Centre, Nairobi on August 04, 2023. [PCS] The local automotive sector appears set for a radical shift, with the transition from the fossil fired engine motor vehicles to electric ones gathering momentum. But then, players will have to contend with the high initial cost of owning electric vehicles (EVs), unstable electricity supply and the high cost of power. The extent of the challenge of power supply was witnessed two weeks ago when the country suffered a 12-hour blackout. There are also concerns that the high cost of power could hamper uptake of EVs, with the latest hike still fresh in the minds of many following a new tariff that came into effect in April this year but also the variables that often go up and down, sometimes every month. Boda boda riders and the matatu operators appear to be early adopters of EVs, with electric motorcycles, electric-buses and charging stations that serve the two industries starting to become a common feature on Kenyan roads. The state appears to be firmly pushing for the shift through moves such as tax incentives and has recently launched the national e-mobility programme. The presidency too appears keen on the transition, with President William Ruto - perhaps in an attempt to inspire confidence in EVs - ditching his diesel guzzler last Sunday to drive himself in an electric car from State House to KICC. He also rode an electric motorcycle when he launched the e-mobility programme in Mombasa. The Finance Act 2023 has removed excise duty on electric motorcycles while zero rating value added tax (VAT). Earlier, the State reduced excise duty on electric vehicles from 20 per cent to 10 per cent. President Ruto, while launching the national e-mobility programme two weeks ago, said the country planned to phase out motorcycles powered by internal combustion engines (ICEs), which use fossil fuels such as super petrol. Autopax Air Yetu electric car that President William Samoei Ruto drove to to the Africa Climate Summit. [Silas Otieno, Standard] The Transport ministry has also recently unveiled a plan that seeks to bank sale of diesel and petrol cars by 2030. Observers note that it was a move more than a decade and a half ago - the zero rating of all motorcycles under 250cc aimed at encouraging more youth to take up employment in the sector - that led to the explosion of the motorcycle numbers in the country and the emergence of the boda boda industry. Kenya Power has additionally introduced a tariff for the EV industry. Firms that are selling EVs in the country are counting on the growing cost of petroleum products in the country to boost uptake or at least pique the interest of motorists and motorcyclists. That and the fact that the Finance Act 2023 has reduced taxes particularly on e-motorcycles. Drained batteries George Songe, operations lead at Arc Ride Kenya, a firm that assembles e-motorcycles in the country and also offers stations where motorcycle riders can swap drained batteries with fully charged ones, noted that the recent incentives for e-motorcycles could be monumental for industry growth. "The Finance Act has really boosted the industry. Before we paid 25 per cent import duty, Sh12,980 excise duty per unit and 16 per cent VAT. Now VAT has been zero rated and the excise duty removed, so the only remaining is 25 per cent import duty. "If you are doing local assembly, you can apply for tax remission and get duty at 10 per cent following the localisation plan," he said, estimating that the implementation of the Finance Act 2023 would result in a reduction in retail prices by about 30 per cent. This would mean e-motorcycles that would go for Sh180,000 will reduce to about Sh150,000. Mr Songe estimates that e-motorcycles could save a boda boda rider over Sh350 per day in fuel costs and more in money that would have been spent on maintenance and repair. "The electric motorcycle has many economic benefits. The first is that you save on fuel costs. The savings are up to 50 per cent outright fuel costs. "At Arc Ride we have a swapping facility that charges Sh350 on unlimited swaps per day, which caters for your fuel needs per day," he said. "A normal rider will spend about Sh700 per day on fuel. You also save on service parts, there are no oil filters and oil to change. So, at the end of the day you have more money in your pocket." Kenya Power estimates that a moderately sized salon car would need about 40 units of electricity (tokens), which can enable the driver to cover about 250 kilometres before the next recharge. At a rate of Sh32 per unit - which is what households are paying - this would mean Sh1,280 to fully charge the car. This could be enough to help a person working within a 20 kilometre radius of Nairobi's Central Business District commute to and from work - a round trip of 40 kilometres daily - for a whole week.. "The average passenger electric car has a 40kWh battery. On a full charge,the range is between 250km to 300km per full charge. Normal charging will take 3 to 5 hours. This, if charged daily, presents about 40 units of energy," said the firm in a report in May after its e-mobility conference. Basigo, one of the firms that has introduced e-buses in the local matatu sector, estimates that a matatu running on diesel can consume between Sh8,000 and Sh12,000, a day, enabling it to cover 250 kilometres per day. There are other additional costs such as regular oil change, which is not the case with the e-buses. The e-buses it has in the market on the other hand pay about Sh20 per kilometre, a fee that covers charging as well as operation and maintenance, which would translate to Sh5,000 per day. Incentives "E-buses are convenient for the drivers, operators, customers and also to the environment," said Brighton Omondi, the maintenance lead at Basigo, adding that incentives would increase the uptake of EVs in the country. "We need to see the government more involved by offering the industry incentives to increase the uptake." He said the challenges that stand in the way, at least from an operational perspective, include the current non-standardisation of charging infrastructure as well as stable power from the grid. "Another area that the government should help the industry in is figuring out the charging infrastructure. We will have more companies and there could be confusion when we have different charging models. "The government should standardise the charging system to curb problems that might crop up in the coming years." He added that at the moment, Basigo does not have backup generators to charge the vehicles and relies on grid electricity. Diesel generators would in a way negate the idea EVs, which was to move away from fossil fuels. The buses are charged at off peak hours of between 10PM and 6AM, when electricity demand is low and the currently is running on electricity generated from renewable energy sources such as geothermal, wind and hydro. In case of a major outage - as was the case on Friday August 25 - many of the buses were not fully charged and the matatus were conspicuously missing from the roads the following Saturday morning. "In case of a blackout, that is a major issue of concern because our buses are purely charged with electricity," he said, in an interview that took place before the blackout. "Kenya Power has given us assurance of minimum downtime and so far we have no major issue but in case of major blackouts, we would have to wait." Basigo has partnered with Associated Vehicles Assemblers (AVA) for the local production of the e-buses. Under the deal, AVA will assemble 1,000 units over the next three years, which Basigo said would create 300 new jobs in the value chain. Public Transport Stakeholders boards a basigo Electric bus at Kencom stage Nairobi during a sensitisation tour courtesy of GIZ Kenya and The Standard Group on January, 19, 2023. [Samson Wire, Standard] While it could be substantially cheaper to run an e-bus, going by the running costs that different operators are giving, the acquisition costs are prohibitive and could for years to come stand in the way of the number of EV buses seen on Kenyan roads. This is primarily because of the batteries, which is the critical component for an EV. The upfront cost for an e-bus is three to four times the price of a diesel powered bus. The firms have tried to work out modalities that would enable matatu owners put the vehicles on the road without having to incur this upfront costs but but recover the money during the life of the bus through maintenance and repair. "The arrangement that we have is that the PSV operator or Sacco foots the cost of buying a vehicle but not the battery. The battery remains in our books over the period the operator will be running the bus. "The operator then gets into a battery subscription and that way we have made the electric bus affordable," Basigo has said in the past. "A cash buy would cost you upwards Sh20 million and as such it would not be viable to be a matatu, it would not make sense. You would also have to set up the charging infrastructure if you are a cash buyer. "In our case, you pay Sh5 million and we will recover the Sh15 million over eight years which is the guaranteed lifespan of the battery." It is the same case of personal cars, where initial acquisition costs could hamper uptake. The Kenya Kwanza administration plans to increase assembly of e-motorcycles in the country 2,000 to about 200,000 by the end of 2024. Ruto said the government will adopt innovative, clean and sustainable energy technologies to not only reduce greenhouse gas emissions but also provide cheaper transport and spur the growth of the electric vehicle industry. Electric mobility "The adoption of electric mobility is a priority intervention to address the challenges of pollution," he said. The President added that motorcycles and tuk tuks (three wheelers) comprise the largest share of the national fleet and are mostly used by those at the bottom of the wealth pyramid. President Ruto assured bodaboda operators that the transition to e-mobility will significantly boost their incomes. "Electric bikes are cheaper to run than petrol," he said, adding that the Government will phase out motorcycles powered by internal combustion engines. Kenya, he added, is committed to honouring its obligations under the United Nations Framework Convention on Climate Change. "We remain on course to meet pollution reduction targets under the Paris Agreement. We are also taking decisive steps in our shift to zero-emission," he said. Spiro, which recently entered into a partnership with the Kenyan government to grow e-motorcycle uptake in the country, said it is planning to set up an assembly plant in Kenya, with plans of deploying a million e-motorcycles in the country. The firm also said that as part it would introduce some 3,000 battery charging and swapping stations, significantly enhancing the nation's EV infrastructure. The Energy and Petroleum Regulatory Authority (Epra) in April approved the e-mobility (EM) tariff. Kenya Power noted that the tariff would enable firms that operate EV charging stations to charge vehicles late at night, when demand for electricity goes significantly down.

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