Ethiopia Automotive EV Market

Rapid technological developments and policy changes are creating new opportunities for U.S. businesses in Ethiopia.  In January 2024, as part of its shift to a green economy, the government of Ethiopia (GOE) became the first country to ban the importation of internal combustion engine vehicles.  This groundbreaking legislation opens the door for U.S. electric vehicle (EV) manufacturers and suppliers of supporting infrastructure. 

Ethiopia has a population of over 120 million, but its tax structure has contributed to it having one of the world’s lowest rates of vehicle ownership—just one vehicle for every 100 people. Imports of vehicles with combustion engines have 15% VAT; up to 100% excise tax; 10% surtax; and 3% withholding tax–thus making them extremely expensive in the local market. Fully assembled and imported EVs only have a 15% “customs duty”, which makes them far more affordable for the average Ethiopian consumer. This new tax incentives for electric vehicles, and an increase in the country’s electricity supply from the Grand Ethiopian Renaissance Dam, leave Ethiopia well-positioned to see a sharp rise in electric vehicle ownership in the coming years.  The anticipated rise in EVs will also generate demand for supplemental products and services, including charging station equipment, EV battery supply, recycling and disposal services, and electrical grid upgrades.

There are currently more than 30,000 EVs in Ethiopia, including both passenger and commercial vehicles.  By 2032, the GOE expects 148,000 passenger EVs and 4,855 commercial EVs will be in the market.  The public sector is leading the charge—in 2022, the city of Addis Ababa purchased 110 electric buses at a cost of $15 million. 

The GOE is working to make the process of importing EVs and EV parts easier and more affordable.   In addition to the elimination of VAT, surtax, and excise taxes on EV imports, the customs duty for partially assembled EVs is even lower, at only 5%. Currently, nine Ethiopian firms assemble vehicles from semi knock-down kits.  Brands assembled in Ethiopia include Kia, Hyundai, Isuzu, Peugeot, and IVECO, as well as lesser-known Chinese brands. 

In addition, the GOE is considering non-financial and operational privileges for EV owners. These may include constructing public charging stations, provision of special license plate numbers, and further incentives to minimize the end users’ cost. 

Ethiopia’s rapid embrace of electric vehicles is a strong signal of its desire to shift away from vehicles dependent on expensive imported fuel.  

While Chinese-manufactured EVs are becoming common in Ethiopia, the EV market is still new enough and large enough for U.S. firms to showcase their leading technologies and solutions.

With Ethiopia’s recent commitment to 100% electric vehicles, U.S. EV companies should strongly consider this unique first-mover business opportunity—particularly among higher-end market segments where consumers are prepared to pay a premium for products with global brand recognition and reputations for high quality. 

To learn more, contact:  Yemesrach Kassu, Commercial Specialist, Email: yemesrach.Kassu@trade.gov