Q&A: Why EVs are an economic lifeline for Ethiopians

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For Ethiopia, Africa’s second most populous country, electric vehicles are not just about protecting the environment but a real economic lifeline. It spends more than $4 billion annually to import petroleum products, worsening its perennial forex shortages, says Yizengaw Yitayih, a senior advisor to the Ethiopian Minister for Transport in this week’s interview with Mobility Rising. 

• By turning to EVs, Ethiopia aims to cut its huge import bill, which has exerted significant pressure on its fragile local currency. A weak Ethiopian Birr makes imports more expensive and raises the cost of living in the country where income levels are still low. At the same time, with its cheap electricity, Ethiopians can hugely cut their fuel costs by switching to EVs, leading to big savings. 

• A further ban on local assembly and manufacture of fuel vehicles is a possibility in the future, says Mr Yitayih, a climate change expert who has decades of experience in Ethiopia’s transport industry. To further accelerate the transition to EVs, Ethiopia is also supporting the mass conversion of the existing fuel vehicles to EVs, he adds. 

More details

Ethiopia was the first country to ban the importation of fuel vehicles in January last year. How do you feel about that status and milestone that Ethiopia achieved?

Mr Yitayih: The ban was put in place mainly due to the environmental and economic issues because the country is mainly dependent on fossil fuels. We spend an annual budget for fossil fuel from $4 billion to $6 billion per year. This is a huge amount of money. And currently, there is no vehicle age restriction in the country. There are all these vehicles on the road so there is an increase of emission from the transport sector yet we also have a commitment to achieve the Paris Agreement.

The import ban was major news across the world. Has it worked so far?

Mr Yitayih: There is a local assembly of these fossil fuel vehicles. We only banned imports from outside, except ambulances, high duty machinery for construction and agricultural services. Except these vehicles, all fuel vehicle imports are banned currently. This policy intervention is an opportunity to expand electric vehicles in the country. In terms of whether it has succeeded, I think there has been a reduction of foreign currency demand, but it needs an assessment or research.

Could we see in future a ban on the local assembly of fuel vehicles within the country, to build on the gains of the imports ban? 

Mr Yitayih: Yes, this is really something that is on the table at the moment. We need to support the electric vehicles sector in so many other ways. We have established an emissions standard for existing fuel vehicles. For vehicles that do not fit the standard, there will be an alternative. We will have a set strategy that converts them to electric vehicles or a technology that could decrease the amount of emission.

Do you think that the companies that sell EVs in Ethiopia are in a good position to fill that gap left by the ban on fuel vehicle imports and meet demand? 

Mr Yitayih: I think so, because we are working to capacitate the local assemblers, assemblers, EV 

assemblers. Currently, there are more than 60, 70 local EV assemblers that start from motorcycles, as well as three-wheelers and high-duty buses. We have deployed 100 e-buses by this year. These electric buses are assembled in Ethiopia. They are imported as CKD kits (Completely-Knocked-Down). So, the government is working to capacitate the local assemblers to fill the gap between the demand of the vehicle and the supply and demand of the vehicle.

Ethio Telecom, which is owned by the government, has been installing charging stations in Addis Ababa. Are we going to see more state-owned companies and agencies doing the same?

Mr Yitayih: Yes, the government gives this initiative to the private sector. The Ethio Telecom programme is a pilot project. The government has directed for each government organization as much as possible as they deploy charging stations on a pilot project. Ethio Telecom is one of these selected organizations. They have installed ultra-fast charging stations with advanced technology. The stations are also self-service. There is no one who collects the money. It is simply scanned by your phone and you can charge your car and pay by your phone. It is a pilot and it is an example for other governmental organisations to take an initiative for the charging stations because there is a gap for charging infrastructure, especially for regional cities. 

Millions of people in Ethiopia still lack access to electricity, which could slow the adoption of EVs. How is the Ethiopian government trying to solve this problem?

Mr Yitayih: Yes, there is a gap to access electricity in the rural areas but we have diversified renewable energy sources, like solar energy, wind energy, geothermal, and mainly hydropower. Our energy sources mainly 90% of energy sources are renewable energy. So we have also established an infrastructure development directive. This directive encourages establishment of solar charging stations in rural areas which do not access electricity. Anyone can use solar system charging stations and other off-grid energy sources from wind, it may be wind or it may be geothermal. So the directive sets these alternatives for rural areas.

As it is globally,  the cost of EVs remains higher than normal fuel vehicles. Does the Ethiopian market offer enough viable financing mechanisms for EV purchase?

Mr Yitayih: Yes, one of the challenges we face with this implementation of or expanding electric vehicles is the initial cost. So we try to set an incentive mechanism that could lower the cost. That incentive mechanism is a tax incentive during the import. There was a tax structure when cars were imported in different categories like build up, complete build up, semi and I think completely knocked down, CKD. Completely built-up EVs pay I think 5% for custom tax. Other semi-knocked down and fully-knocked down vehicles are free from tax that encourages the local assemblers to assemble CKD components and it creates a local job at these industries or companies. However it is not enough, the cost is not that much affordable. So there will be another policy intervention. It could be financial or non-financial, like administrative incentive, it may be free registration cost and there will be another incentive system for the future.