China builds EV production plants in Egypt and Ethiopia

From the newsletter

El Nasr, Egypt's state-owned vehicle manufacturer, in partnership with Yutong, a Chinese electric bus manufacturer, completed assembling its first e-bus last week. In neighbouring Ethiopia, Ethio-Engineering Group, SG Automotive Group, and Mr Luta Investments Group entered into a tripartite MoU to collaborate on the assembly of EVs.

• The launch of the e-bus also marked the opening of the e-bus assembly unit, which can currently assemble 300 buses annually, aiming to reach 1,500 buses annually by 2027. 

• El Nasr is also constructing a car production plant with a production capacity expected to reach 20,000 annually by mid-2025.

More details

• The company is planning to expand its range of production to include electric three-wheelers, minibuses, and EV batteries. 

• The initial production of electric minibuses and EV batteries is set for 2026 and it targets to produce 300 minibuses and 600 EV batteries.

• It is also targeting to source most of its materials locally, aiming to increase local content in e-bus production from 50% to 70%. In car production, it will start with 45% local materials.

• In Egypt and across Africa, Chinese EV makers are partnering with traditional vehicle makers to transition them to EV manufacturing. For instance, in Egypt, Alkan is partnering with BAIC and Egyptian International Motors with Zeeker to set up a manufacturing plant. 

• We observe similar partnerships with both state-owned and private manufacturing companies. These partnerships span various vehicle categories, with more happening on cars.

• The tripartite MoU between Ethio-Engineering Group, SG Automotive Group, and Mr. Luta Investments Group is particularly timely because it comes less than a week after Ethiopia increased customs duties for EV imports from 15% to 20%.

• It is clear Ethiopia wants to promote domestic EV manufacturing and stimulate economic growth rather than relying solely on imports.

• Local manufacturing progress in Africa is most seen in electric motorcycles, with limited production of electric cars and buses. 

• In East Africa, e-bus manufacturing exists in Uganda and Kenya with companies like Kiira Motors and BasiGo. However, their production capacity is small and cannot even meet local demand.

• Chinese EV companies are strategically targeting countries that are not only populous but also ideally located for easy export to other markets, such as Egypt, Morocco, and Ethiopia. 

• These countries' proximity to Europe, a key Chinese target market, clearly indicates their ambition to capture both local and export markets.

Our take

• Africa mainly manufactures fuel vehicles. Few manufacturers are attempting to switch to EVs. Even those attempting the switch lack their own technology and expertise, with most components procured from China.

• Therefore, partnering with Chinese EV makers is a good strategy. They get access to technology, expertise, and financial muscle. This potentially generates much-needed local jobs.

• To attract these foreign companies, however, Africa needs attractive and stable EV policies. There is potential not only for local consumption but also for exports within and outside Africa.