Amid headwinds, Ethiopia's ban on petrol cars causes EV takeup

Despite being Africa's second-most populous country, Ethiopia has a relatively low number of cars on the road, with only about 1.2 million vehicles in total—approximately one car for every 100 people. Contrastively, in Nigeria, Africa's most populous nation, there are around 11.8 million cars, roughly 5 to 6 cars per 100 people.

Ethiopia's low car ownership rates are largely the result of policies. High taxes on gas-powered vehicles drove the cost for consumers to nearly thrice the value of imports. This was part of a broader effort to encourage the use of public transportation and curb private car ownership.

Boldly moving to reduce reliance on fossil fuels and curb pollution, Ethiopia in January 2023 became the first country in the world to ban the import of gas and diesel cars. The policy was designed to accelerate the transition to green mobility, but the path to fruition has been fraught with difficulties.

The decision, which also effectively took the import tax for fully assembled EVs to just 15%, part of its 10-year Perspective Development Plan, cornerstones the country’s green legacy initiative. The plan is to import 148,000 electric cars and 4,800 electric buses by 2032. The public sector leads the charge. In 2022, Addis Ababa bought 110 electric buses at $15 million. 

The timing raised concerns among skeptics. The economy currently grapples with a deficit, exacerbated by recent conflicts, including the two-year Tigray war, which left the country a $44 billion recovery bill. Such strains have delayed infrastructure projects, mostly the Grand Renaissance Dam, essential for the electricity grid—a key aspect in EV adoption.

This is not the first attempt to establish a local EV-making base. In 2020, Ethiopian Olympian Haile Gebreselassie partnered with South Korea's Hyundai to start an assembly plant. A few years down, the venture struggled with chronic foreign currency shortages, mirroring the economic headwinds facing the industry.

Despite drawbacks, the policy has seen some success. Last month, the Ministry of Transport reported over 100,000 imported electric vehicles, and 60 charging stations built across the capital, Addis Ababa. Also, a new EV factory in Debre Berhan, Amhara region, built by entrepreneur Belayneh Kinde for over $52 million, is expected to produce around 1,000 cars annually.

This week, the government further banned diplomatic missions and international organizations from importing petrol and diesel vehicles. In a Monday statement, the Ministry of Foreign Affairs said it is part of the broader plan to transition to clean energy and environmental sustainability.

"All those with diplomatic privileges are required to continue importing only electric vehicles as per the direction enforced for duty-free importation of vehicles," the statement said.

The push has not been without its critics. Many argue the energy infrastructure is unprepared to handle an EV influx. While the transition is positive, they propose a staggered adoption to allow an energy infrastructure catch-up. Its power grid, strained by outages, is ill-equipped. 60 charging stations pales in comparison to the growing number of electric cars on the road.

Lack of infrastructure is not the only challenge. Consumers and businesses struggle with the practicalities of owning and maintaining electric vehicles. Scarcity of spare parts and expert EV maintenance sees many EV owners resort to online tutorials and improvised solutions to keep their engines running.

The economic context further complicates the situation. Ethiopia's foreign currency reserves are critically low, making it hard for businesses to import EV components. Its reliance on Chinese makers has also contributed, as local mechanics and service providers are often unfamiliar with the brands, and manuals are frequently in Mandarin.

The market is dominated by Chinese brands such as BYD and Jetour, which offer affordable options. They are popular for lower upfront costs, aided by government incentives. But their quality and after-sales support have come under scrutiny. Unclear regulations and enforcement mechanisms have allowed importers to sell without explaining maintenance needs or the issues with operating them locally.

Optimism exists amid skepticism. Sam Rosmarin, an Addis Ababa-based climate entrepreneur, argues that the policy, despite its premature implementation, could eventually drive private sector investment. As the market grows, hopes are the sector will fill the gaps left by the government's shortcomings.