Large storms always start with small disturbances. All we need is for a few small wind turbulences to align, and they turn into havoc pretty quickly.
The same is the case with bushfires. All it takes is a careless spark, followed by inflammable material, then dry stuff (also called more inflammable material), a generous supply of oxygen, and then the event to be overlooked for some time. Next, we are looking at mass evacuation and massive firefighting efforts stretching beyond days.
But, and you may wonder, both of the above similis need a lot of ducks to be lined up before you pull the trigger on the shotgun. That’s not common. That’s not something that can happen every Thursday.
And yet it does, not every Thursday, but it does happen now and then. We call them Black Swans, named such because for centuries the Europeans (falsely) believed that all swans were white. So if you found a black one, it’s more indicative of a rare planetary alignment at the least.
Yet, in the modern world, where everything is interlinked, Black Swans have become more likely and frequent than ever before. Four years back, no one could have forecasted the Kenyan motorcycle market falling like a pack of dominoes (clichéd, we know!).
In fact, most forecasters, even those who can see doomsday coming up, play it safe and would have suggested a 20% decline for a year, then a less steep decline, an eventual plateauing, and then a resurgence.
Forecasting a 38% negative CAGR over the next three years was extremely improbable for anyone.
Yet, the market did collapse. It’s a Black Swan, and we had to investigate.
Disturbing Data First
To start with, let’s put some disturbing data out first. The following is taken from the Kenya Economic Survey 2025.
The blue line shows the GDP Growth rate trends for Kenya. The column charts each indicate vehicle sales across different categories.
The blue line looks pretty normal. Post a slump in 2020, the Kenyan economy has been growing at a healthy pace. It can obviously grow faster, but we won’t call it a laggard by any account. Such economic growth should see vehicle sales growing at a healthy pace.
In fact, the Light Vehicle (cars+pickups) sales, mostly driven by private consumption, have followed the GDP growth trend closely, tracing every peak and trough.
The same is the case with three-wheelers, used as passenger cabs as well as for goods transport. They follow the GDP trend very closely.
Then the Trucks and Buses markets in Kenya have been on a strong growth trajectory between 2020-23. There is a sharp slump in 2024, but the economic survey also informs us that the 2024 data is provisional.
What About Motorcycles?
Now, here is the motorcycle sales and import data.
It’s a completely different trajectory. Post-hitting a peak in 2021, there is a rapid decline in both sales and imports. As per the data, between 2021 and 2024, the motorcycle market declined by more than 75% in the period. Kenya is heavily dependent on motorcycle imports, and in the same period, imports declined by nearly 84%.
That’s not normal market behaviour.
What went wrong?
Several things. Like everything big, the current Kenyan motorcycle sales crisis is a result of the compounding of several small problems.
The core of the problem is the way motorcycles are used in Kenya. A lot of them are motorcycle taxis. Some more are used for delivery purposes. Very few are personal-use machines.
We count the Kenyan motorcycle parc at about 2.2 million units and estimate that there are 1.5 million Boda Bodas (motorcycle taxis) on the roads. When a large portion of the motorcycle market is driven by commercial usage, the market becomes overtly dependent on demand & supply, TCO, interest rates, and the economy in general.
It also becomes heavily dependent on another factor – the life of the motorcycle. Any commercial vehicle (and forecasters who cover the truck industry would understand this) market has its up and down cycles, depending on the replacement lifetime. In the case of a boda boda motorcycle, the life of the vehicle is around five years. This relatively short life is because these motorcycles cover a very high daily mileage, often crossing 200km every day, consistently, and are frequently overloaded.
InsightEV – Global Electric Mobility
The Evolution of the Kenyan Market
The present market owes its origins to the evolution that started about 20 years ago. During the early 2000s, the market was nonexistent, and all Kenya had were some Yamaha and Honda 250/300cc dirt bikes. These were small-volume imports, often imported in used condition, and targeted at farm use.
Around that time, a small engine capacity (100cc – 150cc) started looking lucrative for use in motorcycle taxis. They solved two problems: transportation and providing employment. When economies are not highly industrialised, like Kenya was, and Kenya is, any mass employment generation is welcome.
InsightEV – Global Electric Mobility
Meanwhile, public transport, especially outside Nairobi, was nonexistent, and Bodas filled that space.
To support this move to small engine capacity usable commuter motorcycles, the government put in place incentives through reduced duties and tariffs. The result was a rapid growth in the market from 2010 to 2022.
As always, the first wave of entrants was Chinese bikes, cheap, affordable, and low-quality. Those were pretty quickly, for the most part, pushed out of the market by higher quality Indian motorcycles from TVS and Bajaj, who lead the market today. Chinese products still make up around 15-25% of the market, primarily in the rural areas.
Before 2021, this was a very strong market. We had years of growth for motorcycle taxis.
Michael Spencer, the CEO of Zeno, a California-Bangalore-Kenya-based electric motorcycle startup, points out the importance of the Boda economy.
“The driving force that brought motorcycles into the country was very much an economic case. Several things happened during the teens (2013-19) and early 20s. We had successive waves of more and more people buying these motorcycles. You’d kind of have a typical case where a relative would cover the down payment on a motorbike for somebody when they graduated from secondary school to give them a headstart on a job as a boda driver.”
Zeno has just launched the Emara, an electric motorcycle targeted at the Boda community.
What Derailed the Applecart?
By 2021, millions of motorcycles had been imported into the country. So high was the influx and the demand that estimates now put the boda community at more than 2.2 million in Kenya. That, for a country with a population of 56 million, means a boda rider for every 27 people. That sounds high on every scale.
Spencer concurs. Referring to the state of affairs at small localities out in the country, he points out that, “Oversaturation: when one person walks up to get a ride and they’ve got 60-70 boda boda guys, all offering to give them a ride, that’s a bit oversaturated.”
At some point in the last three years, it stopped making sense for an 18-year-old to come out of school and become a boda boda driver. That was a major factor in the collapse of sales: the supply and demand equilibrium, tipping towards the supply side as demand dried up.
The Other Pain: Pump Prices
Let’s look at some more data. Here is some data on the inflation rate, petroleum products import bill, and local pump prices.
Kenya is a net oil-importing economy. Between 2020 and 2022, the crude import bill shot up by 200%.
This was mostly driven by the crash in the Kenyan Shilling (KES) against the US Dollar. As the monthly KES/USD chart below indicates, the KES dropped by more than 34% in less than three years.
It drove up pump prices, as is expected in a country with high petroleum import bills.
But Why Did KES Crash?
Most of the Black Swans over the last five years owe their origins to COVID-19. It is no different here. As COVID ended, the global oil prices spiked up. So did Kenya’s oil import bill. Between 2020 and 2023, Kenya’s oil import bill ballooned by more than 200%, from KES 200 billion to nearly KES 606 billion.
The trade imbalance was severe as Kenya’s tourism was hit badly during COVID, landing a double whammy.
The net result was that Kenya’s pump prices hit a historic high in 2023. They have stayed close to that level with no signs of tapering off in a hurry.
The fall of the KES also made motorcycles more expensive, as all of them are imported. Add to that, the Boda Bodas were unemployed, and the motorcycles were unused during the COVID period.
Then There is The Finance
Kenya is a moderately high inflation economy. It automatically means that lending rates would be high. Throughout 2020-2023, the inflation rate has been climbing. At a 7.7% inflation rate, we expected lending rates to be in the 14-15% vicinity, and the general commercial lending rate stands at 15.28% in Kenya.
However, most Boda Bodas are subprime. That means that interest rates end up at more than 4% per month. In fact, interest rates are so atrociously high that most financial institutions side-step mentioning the actual rates, sticking to talking about only the weekly payment amounts.
The nature of the business means that financing is available for only a maximum of a two-year period.
Tom Courtright is a transportation consultant based in Kenya. He is currently the Research Director at the Africa E-Mobility Alliance and has worked with the United Nations Environment Program, Power Africa, GIZ, and the World Bank in the past. Most importantly, he has spent a significant part of his adult life researching Boda Boda and e-mobility.
He has a contrarian view on the high finance rates, mentioning that,
“Despite those very high interest rates, there is still very high uptake, which really says something about like, what conditions people are used to here (in Kenya) that people are used to very high rates and it’s not a very competitive market.”
Tom equates these motorcycles to jobs and adds that “people need jobs and they’ll take those interest rates because it’s what’s available.”
A Triple Whammy for ICE Motorcycles
In a nutshell:
- The Boda Boda market reached a saturation level due to the rapid growth prior to 2021.
- The COVID standstill caused many Bodas to sit at home, and the motorcycles remained relatively unused. This extended the life of these motorcycles, furthering the saturation problem.
- Due to the crash of the KES, ICE motorcycles became expensive.
- Due to a spike in the petroleum import bill, local pump prices nearly doubled.
- Financing is very expensive.
The end result was that the sale of ICE motorcycles dried up. It is difficult to get the ducks in a row, but Kenya managed to do just that. For the bodas, it made little sense to invest in a motorcycle when the TCO had stopped being favorable.
Do Electric Motorcycles Feel the Same Heat?
Apart from the pump prices, everything else hits electric motorcycles equally hard. In some ways, they are hit harder as they are expensive. Due to the mini-financial crisis that Kenya is going through, the government has little money to subsidize electric motorcycles. Kenya has no direct cash subsidies and only provides support with reduced tariffs and taxes for electric motorcycles.
However, there is a difference in the way participants look at the business. ICE motorcycles are imported, and the respective brand’s custodians are the local distributors. It is a well-defined business where the manufacturer and distributors have defined their margins below which they would not operate. Anyways, decision-making is many thousands of miles away.
The case with electric motorcycles is quite different. Their business model is not the motorcycle. It is the sale of energy through battery swapping. In almost all cases, the motorcycle is not sold. It is deployed through a long-term lease or lease-and-buy arrangement with the rider. Upfront costs are high as electric motorcycles are expensive. However, they don’t need to be sold outright. Wrap the initial cost together with the energy costs, and the overall package becomes more competitive than it ever was for ICE motorcycles. In fact, most boda boda offers are focused on the daily cost of the motorcycle and energy.
However, the challenge is that when you are not selling a motorcycle or expensive batteries, you have to put that asset in your books. CAPEX becomes large, and so does the need for fundraising, something that is not very forthcoming for African e-mobility startups.
Courtright is more direct. He indicates that (unlike the ICE industry) there is a waiting list for electric motorcycles, but a lack of capital means servicing the list is taking time.
On the whole, it’s pretty clear that it’s very much a supply issue and not a demand issue. Access to capital is the biggest obstacle by far, much more than anything else. Five years ago there was a lot of small grant money that helped get some people off the ground and then some equity investors came in. But with the shocks in the last few years, there’s been less capital in terms of equity. The (high cost) debt is there, but then the the debt-equity ratio is not optimal. All of that means that there is insufficient capital, resulting in insufficient number of vehicles for sale. So everyone has very long wait lists of interested customers and are unable to fulfill orders in the time that they would like to.
Would the Market Bounce Back?
Yes, it would. Motorcycles have a life, and we are in a cyclical low. Typical Boda Boda motorcycles have a 5-6 year lifespan, and if the slowdown started in 2021, replacement demand should start trickling in. It’s not going to be an immediate turnaround, though, as pump prices are likely to stay high.
But the bright spark to watch out for is electric motorcycles. We have multiple players in Spiro, Roam, Ampersand, Zeno, and a few more, already offering attractive terms to acquire and start operating an electric Boda. The acceptance of electric motorcycles for Boda Boda is high due to the undeniable TCO advantage. Every player is rolling out their swapping network, so the ecosystem is expanding fast.
Data from the Electric Mobility Association of Kenya (EMAK) puts electric motorcycle sales in Kenya in 2024 at 4,862 units, against overall sales of 68,804 units. That’s a penetration level of more than 7%. In 2023, this was 3.3%. Electric motorcycle sales are increasing at a much faster rate than ICE motorcycles.
That should be a reason for cheer for electric motorcycle startups. Spencer of Zeno concurs. He is very direct in his ambition and looks at the market as:
“1.5 million-2.0 million motorbikes will need to be replaced in the next five years and it’s expected, from everything we’ve seen and everything that the industry has seen, that the vast majority of those will be electric.”
We don’t disagree.
On 11th September, InsightEV is releasing the “The Global Gig Economy Report” report that looks at delivery and motorcycle fleets across 75 of the most densely populated geographies in the world, checks on the potential of electrification, and ascertains how many electric motorcycles would be needed. We forecast that over the next five years, Kenya alone can absorb 1.3 million motorcycles. That is many times the combined production capacity of all the startups operating in the geography.
The quest for capital still remains.
