Regulatory hurdles threaten to slowdown Ethiopia's EV push

From the newsletter

Ethiopia made a bold move banning gas-powered vehicle imports, but the transition to EVs isn't smooth sailing. Dodai CEO, Yuma Sasaki, points out that inconsistent enforcement of new regulations and bureaucratic hurdles are creating obstacles. Experts are worried that this might slow down the EV transition.

• Ethiopia aims to become a leader in EV adoption in Africa and has opened its market to foreign investors as it goes all in on EVs. However, regulations seem to exist more on paper than in practice, leaving investors feeling frustrated.

• Industry players like Dodai have expressed frustration with the complexities of obtaining necessary permits, including number plates for electric motorbikes.

More details

• The Ethiopian market has long been isolated from the global market, but this is changing rapidly as regulations for foreign investment are relaxed. 

• In 2020, Ethiopia established the Investment Proclamation Law, recognising the role of the private sector and foreign investors in supporting a productive economy. 

• In a bold move for a country that does not manufacture EVs, Ethiopia banned the importation of internal combustion engine (ICE) vehicles in 2024. 

• Despite this, Ethiopia is forging ahead, and recent figures indicate a growing market, with over 100,000 EVs sold.

• Dodai, an electric motorbike company, is one of the few that have ventured into the Ethiopian EV market. It has sold over 600 electric motorbikes and recently opened its manufacturing plant, targeting the production of 5,000 motorbikes within the next year.

• Faced with the challenge of an unstreamlined registration process for electric motorbikes, Dodai has partnered with Ethiopian Investment Holdings and the Addis Ababa Transport Bureau to facilitate the process.

• As a new market for EVs, and at a stage where it is opening up to foreign investment, Ethiopia has drafted a Startup Proclamation regulation that is currently out for public consultation. 

• This regulation provides a clear definition of what constitutes a startup and establishes a system for designating and supporting them. 

• It also details the roles and responsibilities of various entities, including the Ministry of Innovation and Technology, the National Digital Economy Council, and a newly established National Designation Committee. 

• The goal of these regulations is to cultivate a thriving startup ecosystem by streamlining processes, providing financial assistance through grants and guarantee schemes, and offering tax incentives and other benefits to designated startups. 

• The ultimate aim is to stimulate innovation, generate employment opportunities, and drive economic growth in Ethiopia. 

Our take

• Ethiopia is like a young child learning to walk, especially when it comes to policies and regulations that target attracting foreign investment, and it needs to learn a lot from its neighbours like Kenya and Rwanda.

• While the ban on ICE vehicles is a step in the right direction, the country still needs to streamline processes to make the EV market more attractive. 

• These regulations are positive, but as is often the case in Africa, policy and regulation are one thing, and implementation is another. If implemented effectively, these regulations could streamline the EV market.

• Funding is one of the major challenges for startups. The startup proclamation includes provisions for financial assistance through grants and guarantee schemes. This access to capital will be crucial for early-stage startups that often struggle to secure funding.