VW to build e-tractor plant in Nigeria

February 25, 2025

From the newsletter

The Volkswagen Group (VW) seeks to build an electric tractor manufacturing plant in Nigeria, backed by Germany. Talks regarding this initiative took place last week on the sidelines of the G20 Foreign Ministers’ Meeting in South Africa. VW Group Africa will manage the VW agricultural electrification strategy within Sub-Saharan Africa.

  • Agriculture forms the principal backbone of Africa’s GDP, contributing between 30-40%, according to the World Bank. These statistics suggest a significant opportunity for companies manufacturing heavy-duty EVs and prioritising sustainability.

  • VW’s pilot Genfarm Project in Rwanda, which utilises electric tractors (as seen in the picture), provides the company with a competitive advantage in assessing the viability of its strategy in countries where agriculture constitutes over 20% of GDP, such as Ghana, Kenya, Nigeria, and Zimbabwe.

More details

  • Volkswagen (VW) has consistently expressed interest in establishing a manufacturing plant in Nigeria, but has encountered persistent regulatory challenges. This regulatory gap was notably highlighted when Volkswagen opted for Egypt over Nigeria for its new Body Shop and Assembly Plant last year.

  • However, Nigeria may now have an opportunity to attract major automakers, not merely through draft policies, but by implementing industry-friendly measures to maintain market competitiveness.

  • Volkswagen has made significant strides in Africa. The establishment of Volkswagen Group Africa (VWGA) in February 2024 represents a strategic shift, enabling the company to oversee its vision and operational expansion across the continent.

  • Volkswagen remains a top-performing automotive brand in Africa, consistently ranking among the most popular vehicle models in South Africa in 2024.

  • The company’s product portfolio, encompassing heavy-duty vehicles, allows it to compete with brands such as Volvo and Mercedes-Benz, both of which have established strong market footholds. However, Volkswagen has distinguished itself through its introduction of electric tractors, in addition to e-trucks, whereas Volvo and Mercedes primarily offer e-trucks in their heavy-duty vehicle range.

  • Furthermore, Volkswagen’s presence in Africa is strengthened by its ability to cater to diverse consumer needs, from passenger vehicles to commercial trucks and mechanised farming solutions.

  • While Nigeria is often considered a strategic entry point for the automotive industry in West Africa, economic and regulatory challenges persist. The country’s inflation rate, which exceeded 30% in early 2024, posed significant concerns for investors.

  • However, the situation has improved, with its National Bureau of Statistics (NBS) reporting a decline to 24.48% in early 2025, thereby increasing Volkswagen’s confidence in entering the market.

  • Additionally, Nigeria's geographical proximity to Ghana, where Volkswagen operates two manufacturing plants, makes it an attractive location for further expansion.

  • The country’s agricultural sector, which contributes approximately 24% to GDP, provides another compelling reason for investment in mechanised and electric farming solutions. In comparison, Kenya and Ghana, where agriculture contributes 33% and 20% to GDP, respectively, are also potential markets for Volkswagen’s agricultural and mobility innovations.

  • Therefore, while Nigeria presents both opportunities and risks, Volkswagen must carefully weigh these factors to determine the feasibility of large-scale investments in the region.

  • Volkswagen’s electric tractor segment could find lucrative opportunities in markets such as South Africa, Kenya, and Zimbabwe, where large-scale commercial farming is prevalent. South Africa utilises 96.3 million hectares for agriculture, while Zimbabwe’s exemption of import duties on electric tractors further enhances its attractiveness as a target market for agricultural mechanisation.

  • The EU’s Carbon Border Adjustment Mechanism (CBAM), scheduled to take full effect in January 2026, will impose carbon taxes on imports, incentivising African countries that export agricultural products to adopt eco-friendly farming technologies.

  • While electric tractors generally require higher upfront investment costs, their long-term operational savings make them an attractive option. A 75-horsepower diesel tractor consumes approximately 23 litres of fuel per hour, translating to 300 litres per day’s work period. With Nigeria’s diesel price at $0.8 per litre, this amounts to approximately $220 per day. Alternatively, a 60-horsepower diesel tractor consumes 35 litres per 100 km driven.

  • In contrast, Volkswagen’s electric tractor model, featuring a 32 kWh swappable battery, offers a more efficient and sustainable alternative, as it can travel approximately 120 km on average. The swappable battery technology reduces downtime and aligns well with large-scale farms in Africa that generate captive solar power.

Our take

  • For electric heavy-duty machinery to gain widespread traction, electric vehicle technology must first achieve substantial market penetration in other sectors, such as passenger and commercial transportation. Increased adoption of EVs will drive down battery costs, improve charging infrastructure, and enhance technical expertise in maintaining electric machinery.

  • While electric tractors and other heavy-duty farming equipment offer long-term cost savings in terms of fuel and maintenance, their high initial purchase price remains a significant barrier. In this case, leasing or pay-as-you-go models could make electric agricultural machinery more accessible to smallholder and commercial farmers.

  • The widespread adoption of electric heavy-duty agricultural machinery in Africa depends on the availability of reliable and affordable electricity. Therefore, off-grid renewable energy solutions, such as solar microgrids, will offer a solution to unreliable grid infrastructure.