Ethiopia's electric vehicle (EV) industry is under pressure from import competition, rising taxes, and unclear policies. Assemblers cite high taxes, foreign exchange instability, lack of financing, and insufficient insurance as major problems.
The Ethiopian Automobile Industries Association (EAIA) recently submitted complaints to the ministries of Finance and Industry about tariff hikes. Taxes on completely knocked down (CKD) vehicles have increased from five percent to 25pc, while semi-knocked down (SKD) tariffs have risen from 15pc to 35pc. A new 10pc surtax has added to their burdens.
Masresha Fikade, EAIA’s general manager, criticised the tax increases and customs inspections that risk damaging spare parts. He called on the Ministry of Industry (MoI) to provide incentives for local assemblers. Masresha also blamed the entry of low-quality imported cars on the absence of a clear automobile policy.
Besufikad Shewaye, CEO of Belayneh Kinde Metal Engineering, states that EV assemblers have faced a threat from by foreign competitors. His company, which assembles city buses, minibuses, and heavy trucks, employs over 360 people and has partnerships with brands like IVECO and Golden Brand. Despite a production capacity of 1,000 passenger cars and 700 heavy trucks, only 500 trucks and 700 cars have been produced in six months.
Besufikad says that the five percent customs duty gap between EV assemblers and importers is insufficient to offset the higher production costs faced by local manufacturers. "We still have financial difficulties," he said.
Belayab Motors, another EV assembler, has the capacity to produce 1,500 to 3,000 vehicles annually but currently assembles only 550 to 750 due to competition from imports. The company, offering over 10 EV models, finds the five percent customs gap inadequate and is considering shifting to imports.
The Association has urged the Ministry of Industry to address the minimal customs duty gap, arguing that high production costs require stronger support.
Mesayneh Wubshet, import substitution head at the MoI, noted that fuel-powered car assembly remains the industry’s main focus, as fuel-powered imports are banned. "However, local electric vehicle production has fallen short of expectations, leading to continued imports," he said.
Although EV importers pay five percent customs duties while assemblers are exempt, local manufacturers argue the minimal gap offers little advantage. Many demand stronger support to remain competitive in the market.
The Ministry of Finance (MoF), in collaboration with stakeholders, has conducted research to boost electric vehicle (EV) adoption and support local assemblers, according to Gosa Tefera, director of tax incentives at the MoF. Following this, the Ethiopian Customs Commission (ECC) updated import levies.
The government says that there is a lack of competition in the fuel-powered vehicle market, leading to tax hikes.
Gosa stated that the tax increases were formulated after consultations with stakeholders, including industry ministers and customs. Gosa says that assemblers also benefit from tax holidays, with two-year exemptions in Addis Abeba and four years in other regions. Government offices are encouraged to purchase vehicles from local manufacturers, according to him.
Assemblers have also criticised the relaxation of pre-qualification requirements, such as garage checks, which they believe undermine quality standards.
On the import side, Biniyam Mengesha, marketing director of Markon Car Import, noted that his company, with over 12 years of experience, transitioned to EVs after the ban on gasoline-powered cars. Markon offers hybrid and electric vehicles in three price ranges and plans to begin local assembly.
Semereab Serkebirhan, a senior executive at O’Clock Motors Plc and vice chairman of the EAIA, argues that local EV assemblers face competition from large foreign manufacturers and importers due to their limited production capacity.
According to the Ministry of Industry (MoI), the assembly sector is growing, with 21,800 vehicles locally assembled in the 2023/24 fiscal year, including 2,061 EVs. However, imported EVs continue to dominate the market, with 25,000 imported in the first six months of the current fiscal year.
Menalem Haris, head of vehicles manufacturing research and development at the MoI, revealed that there are 30 vehicle assemblers, including three exclusively assembling EVs, eight producing both EVs and fuel-powered cars, and 19 focused solely on fuel-powered vehicles.
“We are researching assemblers’ capacity and addressing issues such as power fluctuations, lack of land, raw material shortages, and market inadequacy,” Menalem said. He stated that six assemblers have recently become inactive due to various problems.
In emerging markets, cheaper Chinese electric vehicle options like BYD have surpassed Tesla in production.
The Ministry of Transport & Logistics (MoTL) reported 100,000 EVs in Ethiopia by 2024.
Birhanu Kebede, CEO of Humbd Trading, said the high cost of fuel has boosted EV demand. Last year, Humbd imported 150 EVs, with plans to import 200 this year. The company supplies three EV models, offers 50pc bank loan facilitation, and is Ethiopia’s largest spare parts supplier as a chartered distributor for China’s Yutong Bus.
Brook Aweke, a land transport expert, says that most assemblers rely on semi-knockdown (SKD) assembly, contributing little to value addition. He criticised the lack of partnerships between Ethiopian assemblers and original manufacturers, such as Toyota, which would enable access to spare parts production and technical support.
PUBLISHED ON
Jan 25,2025 [ VOL
25 , NO
1291]
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