Ethio-Engineering Group targets local manufacture of EVs

From the newsletter

Ethiopia’s State-owned corporation Ethio-Engineering Group is targeting to start manufacturing EVs in the country. The corporation was re-established by Ethiopia in 2020 to play a leading role in development of heavy industries in the country. Ethiopia banned the importation of fossil fuel vehicles in January 2024.

• Ethio-Engineering Group has 550 engineers it plans to use to produce EVs. Ethiopia also mines lithium, a metal used to make electric batteries. The corporation is pursuing collaborations with technology providers to process the mineral locally for domestic battery manufacturing.

• Ethiopia is aiming to utilize its total ban on the importation of petrol and diesel vehicles to grow its local EV manufacturing sector. This will involve both State-owned entities like Ethio-Engineering and private investors.

More details

• Ethiopia’s decision to ban the importation of ICEs was drastic, and was made to reduce its huge import bill. But the move found the country, which has a population of more than 126 million, unprepared for the sudden leap into e-mobility. For instance, the country has an electrification rate of only 55%. It also sorely lacks sufficient charging stations for EVs. The high price of EVs will also turn away many Ethiopians.

• The country has however been preparing ground for e-mobility adoption since its ban on ICEs. For example, it recently issued regulations for EV charging stations, aiming to expand its charging infrastructure. It will grant EV charging service providers with 2-year renewable licenses. 

• Ethiopia offers significant incentives for electric vehicles, including zero import duty on electric cars, buses, and trucks, effectively eliminating VAT, and excise taxes on EV imports, alongside reduced customs duty for partially assembled EVs.

• Its efforts mirror the incentives that other countries in Africa such as Zambia, Zimbabwe, Kenya and Uganda have rolled out to reduce the cost of importing EVs and local assembly. This is playing a major role in the reduction of the price of EVs in markets across the continent in recent years.

• Local private EV firms have started to take root in Ethiopia, where the sales of EVs are predicted to grow steadily. Dodai, a local EV startup, recently raised $7million to bring e-bikes to Ethiopia. They have also recently signed a strategic partnership with EIH, Ethiopia's sovereign wealth fund, which will see them collaborate to install 100 battery swap stations within Addis Ababa in the next 12 months. 

Our take

• Ethio-Engineering Group should use its advantage as a State-owned entity to advance its plan to make EVs. With the government’s backing, the company is at a vantage position to access cheaper capital for expansion, as well as the Ethiopian government’s wide network of companies which are potential buyers of the EVs. For the transition to electric mobility to succeed, both the public and private stakeholders will need to pull in one direction.

• In 2024, there was only one public charging station in the entire country, located in the capital Addis Ababa. There were only two specialised garages capable of servicing electric vehicles, and spare parts are difficult to come by. Ethiopia has to fast-track investment in charging infrastructure. The recent regulations it released on the same provides a solid framework to guide investors.

• Even with lower import taxes, electric cars in Ethiopia are too expensive for most people. A second-hand electric vehicle can cost over $33,200, while new models range from $36,300 to $104,000. Ethiopia should explore more ways it can facilitate access to EVs at a more affordable rate, including provision of financing options for buyers.