By Yared Seyoum
- How Affordable EVs Took Off in an Unlikely Market
It was a hot, dusty day in Addis Ababa as Senay Berihun made his way through the crowded streets. As a lifelong commuter, he was used to the smells and sounds of combustion engines. Lately, he had heard rumors of changes coming - a radical government plan to ban fuel vehicles and transition entirely to electric.
Senay was skeptical. How could tiny Ethiopia overhaul its entire transport system so quickly with such poor infrastructure? Still, the electric future piqued his curiosity too.
His brother offered to loan him two million birr to purchase a vehicle. Elated, Senay planned to start an e-ride hailing service. At the markets, his hopes fell. "Only electric cars remain," he said dismayed.
As a first-time buyer on a budget, EVs concerns Senay. "Parts will be impossible to find if anything breaks," he worried. Long family trips to Hawassa added range anxiety as multiple charges would be needed on unreliable rural roads.
Senay's needs demanded gasoline's longer range. But with no fuel cars left, electric posed too much risk. Torn, Senay reconsidered the loan, doubting EVs suitability despite lower costs.
"It's too risky," he concluded, uncertain how to navigate the post-ban realities and seize his opportunity.
A Growing Global Transition
Ethiopia's bold move to transition its entire transport sector away from fossil fuels through the catalyst of electric vehicles caught the attention of the world. It showed that even developing nations could "leapfrog" outdated combustion technologies, getting straight to affordable EVs if policies enabled fast mass adoption.
Over the last five years, nearly every major economy announced plans to phase out or ban the sale of new internal combustion engine vehicles by 2040. Cities across Europe, Asia and North America rolled out incentives for purchases and started limiting or surcharging access of gas guzzlers to population centers.
Automakers racing to introduce dozens of new electric models every year accelerated this global transition. Traditional giants like Toyota, GM and VW that had dragged their feet on EVs were now doubling down on massive investments in batteries and manufacturing capacity to meet demand. Tesla's meteoric rise proved there was big money to be made with the right products and strategy around electrification.
Sales of electric cars surpassed those of diesel vehicles in Western Europe by 2030, achieving over 40 percent market share in countries like Norway, Netherlands and Germany. In the US, President Biden's two trillion dollars infrastructure plan included billions for a national network of 500,000 public fast chargers and tax credits up to 12,500 dollars for American-made EVs, further fueling consumer buying.
China cemented its early lead. In 2023, more than 8 million new plug-in electric cars were registered in China (up roughly 46 percent year-over-year). The BYD Song was the best-selling EV in China last year, repeating its 2022 success. The model finished 2023 more than 100,000 units ahead of the second-place Tesla Model Y.
The Rise of Green Mobility in Ethiopia
When Ethiopia's transport ministry shocked the nation by announcing a ban on imported gasoline vehicles at the beginning of 2024, it sent the budding automotive sector into a state of flux. On the surface, the move aligned with global initiatives to reduce carbon emissions and fuel dependence. However, missing was an in-depth roadmap addressing practical implementation challenges.
For entrepreneurs like Abenezer Kassa, the policy shift created a gold rush opportunity. "Traders rushed to bring in all types of electric vehicles, seeing the tax benefits," he recalls. Having imported Chinese EVs since 2023, he expanded operations, joining dozens of new dealerships launched nationwide.
Most imports originated from China, offering affordable commuter options like the Changan BenBen micro-hatchback priced around two million Birr (USD 17,000). Mid-sized SUV models such as the BYD Seagull and Neta U proved popular too, ranging 3-4 million Birr. Luxury Toyota and Honda hybrids topped out near six million Birr.
"Demand exceeded our expectations," says another importer, who attributes this to lack of options.
However, the lack of vehicle charging access soon emerged as a gaping issue. Despite imports of 100,000 EVs estimated today, Ethiopia boasts not a single public fast-charger. Home charging infrastructure is also missing from newer housing developments and urban planning schemes.
These shortcomings severely constrain drivers. Most can only charge slowly overnight at home or work using standard outlets. Long-distance travel becomes impractical without ways to top-up battery levels en route.
This has dampened consumer confidence, notes auto consultant Mikiyas Aweke. "Many feel trapped after the purchase due to charge anxiety issues." Some early adopters even returned to gasoline cars out of frustration.
For fleet operators too, absent fast-charging severely limits viable routes and duty cycles. The Addis Ababa City Transport Enterprise's dozens of e-buses and 150 mini-buses must return to base daily for recharging instead of operating longer shifts.
The foreign currency crunch played a major role in the government's decision to fully ban gasoline vehicle imports. Ethiopia suffered deteriorating trade deficits and foreign reserves in recent years as fuel costs depleted its hard currency holdings. Import-reliant industries like automotive were squeezed as access to dollars tightened. Several "non-essential" goods were restricted from opening letters of credit.
In practice, this ban on using forex for unnecessary items had already curtailed most fuel vehicle imports in the months prior. As over 99 percent came through Letter of Credit, the policy change effectively throttled the sector. By making the ban official, it aimed to preserve dwindling reserves for vital imports like fuel, food and machinery while also pushing consumers towards electric alternatives seen as strategically important for energy security and balance of payments. The move showed how forex limitations were a primary driver accelerating Ethiopia's electrification timelines.
Easing Private Sector ParticipationÂ
One of the biggest hurdles for EV businesses in Ethiopia lies in navigating the complex import process. Securing foreign currency from banks remains a major challenge that often inflates total vehicle costs.
"Getting forex approval is a lengthy process that sometimes takes months. We have to understate the purchase values on documents to get letters of credit approved," explains an importers.
Without access to official rates, importers are forced to source dollars from underground exchange houses where prices are two times higher than bank rates. On top of this, vehicles face additional duties, taxes and processing fees that significantly mark up costs.
A 10,000 dollars EV priced abroad could end up costing Ethiopian buyers around 14,000 dollars after all costs are accounted for according to industry estimates. Freight averages 2,500 dollars per vehicle while insurance adds another 900 dollars. Then there's a five percent welfare tax on top of the standard 15 percent import tariff applied.
Bureaucracy has also hindered private involvement critical to scaling nationwide charging access. Lengthy permit procedures and unclear land acquisition guidelines represent deterrents for station developers.
"Banks are reluctant to finance such projects lacking adequate precedence and regulations in Ethiopia," notes one industry source. Revenue models like pay-per-use also require enabling legislation for commercial viability.
Skills Shortages Remain an Obstacle
Availability of servicing and repairs presents another stumbling block for Ethiopia's EV adoption trajectory. Few local automotive technicians currently have expertise in hybrid/electric vehicle systems maintenance.
Specialised diagnostic equipment and spare parts remain scarce due to the sector's nascent stage. This translates to lengthy downtimes when mechanical issues arise, eroding user confidence and satisfaction.
Authorties are considering equipping technical colleges to fast-track curriculum overhauls producing 'green-skilled' graduates. However, training capacity remains mismatched against the country's aspirations of transitioning millions of vehicles in the coming decade.
Filling this skills gap will prove a multi-year endeavour requiring coordinated investment from automakers, training institutes and the public sector.
Running on Empty
As the country's electric mobility sector starts to take shape, building out electric vehicle charging infrastructure will be crucial to support widespread adoption. But high costs present challenges to developing Ethiopia's network at the necessary scale.
Estimates suggest Ethiopia will require around 10,000 public charging stations to sustain a fleet of 100,000 electric vehicles. The majority would be slower Level 2 chargers installed widely in cities and along highways.
However, recent data shows the average installation cost for a single Level 2 station is around 6,000 dollars - higher than previous estimates of 2,000-3,000 dollars per unit.
At this price point, developing the estimated 8,000-9,000 Level 2 chargers needed across Ethiopia would total around 48-54 million dollars. Fast chargers requiring even more advanced installation are significantly costlier, potentially pushing total network costs up towards 100 million dollars or more.
As one of the least developed nations electricity-wise, Ethiopia's power infrastructure would also need upgrades in some areas to accommodate expanded charging demands. Reliability issues pose added barriers.
With limited domestic resources, attracting foreign capital and partnerships will be essential to finance the scale-up of chargers commensurate with Ethiopia's growing fleet goals. Overcoming these infrastructure hurdles is seen as a prerequisite for wider electric mobility adoption.
A Phased Transition Approach Gains Traction
Experts advise that the transport ministry has gradually course-corrected towards a more consultative and graduated policy path.
Rather than blanket prohibitions, proposals now revolve around emissions and fuel economy standards accompanied by tangible fiscal incentives. The idea of setting binding deadlines has been replaced by non-prescriptive targets and review, an economist said.
"A phased approach balancing viability with ambitions would yield better outcomes," notes the expert. Parallel investments in enabling infrastructure are now prioritised before exponentially scaling vehicle deployment programs.
A Lack of Coordination Hinders Progress
Part of the delay stems from institutional complexities. Multiple public agencies share oversight of the transportation sector with no single driving force to coordinate this transition.
The Ministry of Transport formulates strategies while the Ministry of Finance and Customs Commission oversees vehicle import duties. Regional governments also develop local transportation master plans. This diffusion of responsibilities has slowed coherent policy rollouts and public-private co-investment moves.
"There needs to be one central authority solely devoted to electric mobility issues with budget authority," suggests the economist.
