Ethiopia to build local EV battery ecosystem

From the newsletter

Ethiopia aims to establish a local EV battery manufacturing industry to address its dependency on EV imports and the growing number of EV adopters. The implementation report presented to the House of Representatives proposes plans to maximise the potential of the Qenticha mine, which holds 110 million tonnes of lithium ore.

• Currently, Ethiopia has over 400 companies that import or assemble electric vehicles. The latest figures indicate that the country has more than 100,000 EVs, and the government’s goal is to increase this number to 500,000 over the next 10 years. 

• The rapid increase in EV adoption is driving up the demand for spare parts, including battery packs. Therefore, the domestic manufacture of EV batteries will offer a solution to the industry and also help to reduce the price, which is approximately $5,000 - $10,000 in the international market.

More details

• Ethiopia’s Qenticha lithium mine could significantly impact the EV battery manufacturing industry by filling the EV battery gap not only in Ethiopia but also across the continent. The government is already working on an implementation plan to maximise the potential of this mine, with long-term goals to establish a domestic EV battery manufacturing sector. Lithium-ion batteries remain a critical component of EV production, and Ethiopia’s access to abundant lithium could reduce reliance on imports, lower manufacturing costs, and create employment opportunities.

• Africa’s electric vehicle market, currently valued at $15.80 billion, is projected to grow to $25.40 billion by 2029, reflecting a CAGR of 10.2%. This means that batteries, along with other spare parts, will be needed for repairs and upgrades. However, most EV batteries in Africa are outsourced from Asian, American, and European markets.

• Africa's lithium reserves, particularly in countries like Ethiopia, Zambia, Namibia, Zimbabwe, and the Democratic Republic of Congo, could significantly alter the trend of relying on imports. Morocco, South Africa, Kenya, Egypt, and Nigeria are actively developing battery supply chains, but they cannot meet the growing demand for EV batteries due to the surge in electric vehicle adoption.

• Locally produced EV batteries can be significantly cheaper than imported ones due to reduced transportation costs and the ability to process raw materials like lithium closer to production sites. A key benefit is that by leveraging local mining activities, the cost per kWh could potentially decrease by 30-40%, making EVs more affordable for African consumers and stimulating greater adoption. Local production can also reduce the impact of global price volatility, ensuring more consistent costs for manufacturers and consumers. Additionally, it could significantly reduce downtime for repairs and maintenance, creating a more resilient market for electric vehicles.

• Key challenges in establishing a local EV battery manufacturing industry in Africa include the lack of infrastructure, financing, and skilled labour. Access to raw materials like lithium and cobalt, while abundant in some regions, requires significant investment in mining and processing technologies. South Africa and Nigeria have already taken steps to attract international investments and partnerships, but obstacles remain, particularly in the areas of technological expertise and supply chain logistics.

• The establishment of special economic zones dedicated to battery manufacturing can also help attract investors. By aligning policies with global trends and investing in the local workforce, African countries can create a more attractive investment climate for both local and international players. A successful example is Morocco, where the government is promoting the country as a potential battery hub for Europe.

• South Africa is developing its battery cell manufacturing capabilities, while Morocco is positioning itself as a future battery hub for Europe. Ethiopia’s Qenticha lithium mine and Nigeria’s cobalt reserves offer huge potential for the raw materials needed for local production. 

• Nigeria and Morocco are already exploring opportunities to process raw materials locally, which would reduce reliance on foreign suppliers. African nations could also consider creating regional partnerships to collectively secure access to critical raw materials and share resources for processing and manufacturing.

Our take

• Original equipment manufacturers can mitigate the impact of global supply chain disruptions by setting up local EV battery production facilities in Africa. This would enhance the competitiveness of African EV manufacturers in both local and export markets.

• African manufacturers can overcome challenges related to battery manufacture by partnering with local mining companies and investing in the development of raw material processing plants. These efforts would also boost the quality of locally produced EV batteries and contribute to Africa’s economic development.

• Investors can tap into Africa's EV market by focusing on key growth areas such as battery manufacturing, and raw material mining. Ethiopia, Morocco, Nigeria, and South Africa are prime targets for investment in the growing battery supply chain.