Images: EVs in Addis Ababa, Ethiopia, courtesy of Moses Nderitu.

Ethiopia Says ICE Vehicle Import Ban Continues As Part of New Economic Reforms, Only EV Imports Allowed!

July 31, 2024July 31, 20242 months ago Remeredzai Joseph Kuhudzai 0 Comments

Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

In an unprecedented move some months ago, Ethiopia became effectively the first country in the world to ban the import of internal combustion engine vehicles. That ban was not some futuristic target for 2030 or 2035. It was an immediate ban on the import of ICE cars.

Ethiopia’s motivation? A high fossil fuel import bill of over US$5 billion a year, taking a huge chunk of the country’s scarce foreign currency resources. Energy security and self-sufficiency was another major driver. Ethiopia recently commissioned the first units from the 5,150 MW Grand Ethiopian Renaissance Dam (GERD). The GERD will add another ~15,500 GWhs of clean electricity to the country’s energy mix. This means Ethiopia now has some exceptionally good locally generated renewable energy that can be used to substitute a significant portion of that huge import bill.

This week, Ethiopia announced huge economic policy reforms. Some of the key measures announced include:

A shift to a market-based exchange regime, whereby banks are henceforth allowed to buy and sell foreign currencies from/to their clients and among themselves at freely negotiated rates, and with the NBE making only limited interventions to support the market in its early days and if justified by disorderly market conditions.
The end of surrender requirements to the NBE, allowing foreign exchange to be retained by exporters and commercial banks and thus substantially boosting FX supplies to the private sector.
The removal of import restrictions that previously prohibited 38 product categories and the broader liberalization of the foreign exchange market for the imports of goods and services, while capital account outflows remain restricted as before.

More reforms were announced, which you can find here, however, in this article we will pause at point number 3, and zone in on it. As part of measures announced some months ago, some very tough import restrictions had been placed on products in 38 categories. Included on that restricted items list were fully built internal combustion engine passenger cars and three-wheelers. For a country where the majority of vehicles are imported as used ICE vehicles, these measures meant the country was essentially throttling a significant amount of vehicle imports, as well as reducing pressure of demand for foreign currency and ultimately reducing the fossil fuel import bill.

Imports of fully-built electric passenger cars and three-wheelers were not affected by the ban, and hence encouraged. This, coupled with an earlier policy that reduced import duties and taxes levied on electric vehicles, led to a surge in the number of electric vehicles imported into the country as well as those imported as knocked-down kits and assembled in country. Tens of thousands of electric cars have been imported into Ethiopia in such a brief period.

Ethiopia’s Finance Ministry followed up with another announcement to clarify point 3 above. In a letter addressed to several government departments including the Customs Commission, the Finance Ministry relaxed import restrictions on some of the 38 product categories. However, the Finance Ministry’s letter reiterated that imports of fully-built internal combustion engine passenger cars and three-wheelers are still banned. Knocked-down kits for locally assembly of internal combustion engine vehicles are allowed, however, as the majority of vehicles in Ethiopia have traditionally been imported as fully-built units, this ban is essentially a total ban on ICE cars! Another point to note is that while the country is trying to encourage the local assembly of vehicles, there has been an inclination towards supporting the assembly of EVs over ICE vehicles. And of course, as the transition to electric accelerates across the world, prudent investors looking to start assembly plants in Ethiopia would rather look into EVs than ICE cars.

As discussed in my last article, quite a number of people in Ethiopia have been complaining about such an abrupt ban, as they feel that there are not enough public charging stations in the country at the moment, as well as service centers and trained EV technicians.

Perhaps we will start to see more investment into charging infrastructure following the economic reforms announced this week, which may make it easier for investors to commit to implementing these kinds of infrastructure projects. The initial decision to restrict the import of ICE cars was a very bold move by the Ethiopian government. It is interesting to see that even after the biggest economic policy reform announcement in the country in decades, the country is maintaining its tough stance on ICE vehicle imports.

Ethiopia has a population of 126 million people, but the total number of vehicles registered in Ethiopia is around 1.2 million. Most of these vehicles are over 20 years old. According to reports and announcements from the Ethiopian government, Ethiopia had a plan to catalyze adoption of electric vehicles with a 10-year target of seeing 148,000 electric cars and close to 50,000 electric buses on its roads by 2030. However, Ethiopia has made incredible progress on this path, to the extent that the Ministry of Transport and Logistics recently said that this target of over 100,000 electric vehicles has already been met in just the first few years of the plan.

With the government reiterating its position and maintaining a ban on the imports of fully-built ICE vehicles, Ethiopia could become one of the fastest countries to transition to electric. Loads of work ahead to sort out things like charging infrastructure and technical support for vehicles, however, all of this points to a remarkably interesting next couple of years for Ethiopia’s transport landscape. We will be following these events very closely.

Images: EVs in Addis Ababa, Ethiopia, courtesy of Moses Nderitu.