Table 2.: Total Imports and Import of Vehicles

The industry is complex, involving high and integrated technology that can be transferred, and can drive the whole industrialisation process by creating quality jobs for engineers and technicians

2.2.2 Policy directives, investment incentives, tax issues 2.2.3 Supportive institutions and key stakeholders

2.2.4 International vehicle brands in the country

Since 2018, the latest change in government executives, there have been some developments in terms of industrial policy, where the private sector has attracted increasing focus. Unlike other Sub-Saharan African countries like South Africa – and even by contrast to neighbouring Kenya – Ethiopia doesn’t have any clear national policy guide to develop the automotive industry. For example, South Africa, Kenya and Nigeria have national automotive industry development policy plans in place, with various incentives specific to the sector (VMIATSA, 2019).

Following discussions with FDRE MIDI, it is clear that the automotive industry in Ethiopia is still treated under the general investment or FDI incentive package. This shows a lack of understanding of the unique nature of the industry from the government side, with the industry only lately being given special attention under the metal and engineering key priority sectors. The industry is complex, involving high and integrated technology that can be transferred, and can drive the whole industrialisation process by creating quality jobs for engineers and technicians (FDRE MIDI interview). So far, only the SOE BAI (Bishoftu Automotive Industry) has plans to, in the next five years, localise 60% of the imported components by redesigning, designing and producing locally, aiming at manufacturing a local brand vehicle (Interview with BAI representatives).

In order to facilitate and attract FDI, there are a number of competitive fiscal and non-fiscal incentive packages for investors. Incentives include corporate tax breaks, customs duty exemption on imported equipment, no income tax for foreign workers, access to loans, low land and factory In order to facilitate, license, and promote FDIs, the government established various institutions. These include the Ethiopian Investment Commission (EIC), the Industry Ministry, the FDRE Metal Industry Development Institute and the Industrial Park Development Corporation. In addition to the above governmental institutions, there are also non-governmental institutions related to the automotive industry and working on labour and related issues. Among these, there is only one association to mention representing major vehicle sales and assemblers in the country: the Vehicle, Machinery Importers, and Assemblers Trade

Currently, there are multinational vehicle brands partnering with local companies including Li-Fan and other Chinese brands, KIA assembled by Belayab Motor, Peugeot, Geely and BUD by Mesfin Industrial Engineering, Hyundai by Marathon motors group and other multiple Chinese brand vehicle assemblers. In terms of assembly, the above-mentioned companies claim they have the capacity to produce a range from 5,000 up to 10,000 vehicles each, annually, but currently they are each only producing in the hundreds – below 500 vehicles – annually (Ethiopian News Agency, Addis Ababa).

Marathon motors group, in addition to currently assembling Hyundai vehicles with an annual production of up to 5,000, has recently introduced the Hyundai IONIQ electric car into the market and plans to import hydrogen fuel cell vehicles in the next few years. By 2030, the company plans to boost production with a 5.5 billion euro investment to reach vehicle assembly of up to 700,000 annual units, of which 500,000 will

building rents (low land lease for 50 to 80 years, the cheapest in the world). The government also highlights low cost electricity, availability of water and an abundant and inexpensive labour force adding to the presence of industrial parks and zones with all infrastructures, where it is much easier to establish a plant (FDRE Industry Minister, Investment opportunities in Manufacturing Industry, 2017).

In addition to the relatively favourable business environment and the strong government support for both foreign and local investors, the country also offers special geographical and preferential trade arrangements aimed to create opportunities for integration within the global market or global value chains. Geographically Ethiopia is located at the crossroad between Europe, Middle East and Far East markets, with the near, convenient access to the Red Sea through the port of Djibouti.

Furthermore, the country has access to global markets via the African Growth and Opportunity Act (AGOA), a preferential trade agreement between the USA and 37 Sub-Saharan African countries in place until 2025 which covers a wide range of exports. Ethiopia also benefits from COMESA (Common Market of Eastern and Southern Africa) and the many bilateral trade agreements concluded with Western countries, including the Netherlands, Belgium and Luxembourg. Ethiopia is also part of the “Everything but Arms” programme that has been set up to provide access to the EU market for Lesser Developed Beneficiary Countries, free of duty and without quota restrictions, for all export products except arms (EIC, Investment guide to Ethiopia, 2017). Sector Association (VMIATSA). VMIATSA was established in 2014 and is composed of eleven leading brand vehicle companies to represent and facilitate its members’ interest. Other organisations like Friedrich Ebert Stiftung (FES) and ILO-Ethiopia country offices are also present. FES has been working with CETU for many years on labour issues. IndustriALL Global Union has also been working with the Industrial Federation of Textile, Leather and Garment Workers Trade Unions and the National Federation of Energy, Chemical and Mining Workers Trade Unions for decades, running various union building projects.

be hydrogen-powered fuel cell passenger and commercial vehicles. Furthermore, it is forecasted that the country’s demand for passenger cars will reach 2 million annually and preparation to meet the future demand and exploit the market is underway (Ethiopian News Agency, Addis Ababa, 29 January, 2019). The Chinese government-owned brand JAC recently restarted its assembly plant and is assembling truck and passenger vehicles in partnership with the local Tamrin International Plc and Li-Fan, for modern taxi cabs and for other business (www. addisinformer.wordpress.com).

In 2019, Volkswagen also signed an MOU with the Ethiopian government to join the auto industry. The company is carefully seeking to enter the market and soon will kick off or start up with a gradual step-bystep plan to invest a worth of USD 700 million. According to the VW representatives briefed on the local news, training facilities and other preparation (a starting point) is expected to launch soon (www.cnbcafrica. com/videos/).

By 2030,

Marathon motors group plans to boost production with a 5.5 billion euro investment to reach vehicle assembly of up to 700,000 annual units, of which 500,000 will be hydrogenpowered fuel cell passenger and commercial vehicles.