Kenya is contemplating implementing fuel-efficiency standards for imported vehicles in response to rising fuel costs. The country's petrol and diesel prices have increased by up to 22% year-on-year, with motorists currently paying KES 226.96 per litre for petrol and KES 227.76 for diesel. This surge in fuel prices has prompted policy advisers to propose average-fuel-efficiency rules for imported vehicles. The proposed regulation aims to curb fuel-import spending, which is expected to rise significantly in the coming years.
The draft regulation would assess the average fuel efficiency of all vehicles an importer or manufacturer brings to market, allowing the overall fleet average to improve without mandating a uniform target for each model. This approach would also cover second-hand imports, a significant factor in Kenya where over 80% of imported vehicles are sourced from Japan and are often less fuel-efficient than models sold domestically in their country of origin. The regulation is expected to have a positive impact on the environment and the economy.
International examples were cited to support the proposed regulation, including New Zealand's efficiency requirements and Chile's experience. In Chile, 88% of importers adjusted their supply within 18 months of introducing standards, leading to a 17% drop in EV prices and a three-fold increase in available electric models. These examples demonstrate the potential effectiveness of fuel-efficiency standards in promoting the adoption of more efficient vehicles.
Supporters of the regulation argue that predictable standards could also boost local vehicle assembly, which currently operates at less than 30% of its combined installed capacity of 46,000 units per year. By giving investors confidence to expand production, the regulation could help increase local vehicle assembly and create new economic opportunities. This, in turn, could lead to job creation and economic growth.
The shift towards more efficient vehicles, including electric vehicles (EVs), is already underway in Kenya. EV registrations have risen sharply, from 5,294 in 2024 to 24,754 in 2025. However, this shift raises questions about future road-maintenance funding, prompting suggestions such as distance-based charges, tolls, or electricity-related taxes. The government will need to consider these issues as it develops the proposed regulation.
The session that discussed the proposed regulation did not set a timeline for adopting the regulation, noting that its impact will hinge on the final efficiency targets, implementation schedule, and the affordability of more efficient vehicles for Kenyan buyers. The government will need to carefully consider these factors as it moves forward with the regulation. The proposed regulation is expected to have a significant impact on the automotive sector in Kenya.
The implementation of fuel-efficiency standards is expected to have a positive impact on Kenya's economy and environment. The regulation could help reduce the country's reliance on imported fuel, improve air quality, and promote the adoption of more efficient vehicles. Key points include:
Key points
- The proposed regulation aims to curb fuel-import spending, which could rise from $783 million in 2025 to $1.32 billion by 2040 without intervention.
- The regulation would assess the average fuel efficiency of all vehicles an importer or manufacturer brings to market.
- The implementation of fuel-efficiency standards could boost local vehicle assembly and promote the adoption of more efficient vehicles.
