Ethiopia to expand tiny car assembly business in industrial drive

ethiopian flagEthiopia has grand ambitions for its tiny auto industry, seeking to transform a handful of assemblers that bolt together imported kits into a network of factories that can make the country Africa’s biggest car manufacturer over the next two decades. It is part of a vision to turn a nation that is among the poorest in Africa into an industrial centre that no longer relies on fickle weather patterns that periodically devastate the agrarian economy and leave its people hungry. Plans are taking shape in industrial zones around Addis Ababa and the northern city of Mekelle, where Ethiopian firms and Chinese partners assemble the vehicle kits. Ethiopia produces about 8,000 commercial and other vehicles a year for the home market, about a quarter of which are cars.

But executives say they have capacity to make more if they could obtain extra foreign exchange to import kits in greater numbers. The nation imported more than 38,000 assembled cars in 2015, a more than 50 percent increase on 2014. “There is a lot of potential for growth,” said Ma Qun, deputy manager of China’s Lifan auto group in Ethiopia, which has the capacity to assemble 5,000 cars a year but whose output is less than a fifth of that. “We want to start exporting from Ethiopia by 2018, or a year later,” he said. For now, Ethiopia is a minnow in African terms. South Africa and Morocco are involved in the full manufacture of vehicles annually making more than 600,000 and 200,000, respectively. Egypt, Sudan and Kenya also assemble vehicles.

The scale of the challenge is formidable. South Africa boasts a big domestic market to drive the industry with annual per capita income of $6,800 compared to Ethiopia’s meagre $550, according to World Bank data for 2014. Morocco, with annnual per capita income of about $3,070, lies only a short distance across the water from the huge European market. Assemblers in Ethiopia, which put together Chinese brands Geely, FAW and BYD as well as Lifan, face other hurdles, notably in obtaining dollars to import kits given the nation’s scant currency reserves.

They are also battling to reassure consumers about quality. But Ethiopia has delivered on ambitious targets before, boasting one of Africa’s fastest growing economies for more than a decade. New dams have turned the country into an electricity exporter and it has a rapidly expanding transport network. “The aim is to become a leading manufacturing hub in Africa,” State Minister for Industry Tadesse Haile told Reuters.

“We want to become the top producer of cars on the continent in 15 or 20 years.” This year, an electrified railway will link the land-locked nation of 97 million people to Djibouti port where the Red Sea meets the Indian Ocean, providing a cheap and fast way to import raw materials and export finished goods. NEW FLEET China, which has become a close development partner for a nation whose state-led economic model has closely mirrored the Chinese approach, is building the railway. Chinese car firms are now at the centre of Ethiopia’s vehicle manufacturing plans.

An executive at one Ethiopian manufacturer said Chinese car kits were cheaper than those from rivals, such as in Japan. “They are helping us in marketing,” he added, asking not to be identified. Ethiopia desperately needs a new fleet of cars. The streets of Addis Ababa are filled with dilapidated vehicles. Some of the ubiquitous blue and white taxis are rattling Soviet-era Ladas built in the 1980s. Many of its imports are used vehicles.