Local assembly plants in Ethiopia’s fledgling auto industry plan to begin exporting cars in a couple of years in a market dominated by Chinese brands — part of an effort to industrialize the agrarian economy, Reuters reports.
It’s a grand ambition for the tiny auto industry, transforming 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.
If it succeeds, it won’t be the first time Ethiopia delivers on an ambitious goal. With one of Africa’s fastest growing economies for more than a decade, Ethiopia has pulled off the Grand Ethiopian dam and others that helped make it an electricity exporter.
Ethiopia’s expanding transport network includes the successful Ethiopian Airlines, the largest and fastest growing African airline, according to GhanaWeb. Ethiopian Airlines won the African Airline of the Year Award 2016 at the 25th Anniversary African Aviation Air Finance Africa Conference & Exhibit in Johannesburg.
This year, a railway will link the landlocked country, population 97 million, 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.
“The aim is to become a leading manufacturing hub in Africa,” said State Minister for Industry Tadesse Haile in a Reuters interview. “We want to become the top producer of cars on the continent in 15 or 20 years.”
In industrial zones around Addis Ababa and the northern city of Mekelle, Ethiopian firms and Chinese partners assemble vehicle kits. Theey imported 38,000 assembled cars in 2015, a 50 percent-plus increase over 2014.
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Ethiopia produces about 8,000 commercial and other vehicles a year for the local market, including about 2,000 cars but they could make more if they could get more foreign exchange to import more kits, Reuters reported.
“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 1000. “We want to start exporting from Ethiopia by 2018, or a year later,” he said.
For now, Ethiopia has to compete with South Africa, which makes 600,000-plus fully manufactured vehicles, and Morocco, which makes 200,000. Egypt, Kenya and Sudan also assemble vehicles.
South Africa has a large domestic market with annual per capita income of $6,800 compared to Ethiopia’s $550, according to World Bank 2014 data. Morocco — annual per capita income, $3,070 — is geographically close to the huge European market.
Assemblers in Ethiopia put together Chinese brands Geely, FAW, BYD and Lifan.
With Ethiopia’s scant currency reserves, assemblers face challenges getting enough dollars to import kits. Another problem is consumers unsure about quality.
Chinese car firms are central to Ethiopia’s vehicle manufacturing plans. Chinese car kits are cheaper than rivals such as Japan, said an executive at an Ethiopian manufacturer.
South Korea wants a piece of the action. South Korean automobile manufacturer Kia Motors Corp. has broken ground on a community-run auto mechanic training center in Ethiopia due to be completed in 2017, EconomicTimes reported. The centers will enable trainee mechanics to work towards national qualifications.
Ethiopia’s car assemblers face another challenge. Their cars don’t hold their prices as well as finished imports. “The big obstacle they face is resale value,” said Araya Lakew, whose mekina.net website links buyers and sellers.
Some used imports, such as Toyotas, even gain value with the weaker currency, unlike locally assembled models.
Lifan’s marketing director Tomi Su said his firm would keep making models that are more attractive to consumers. “There will be new gadgets in every upgrade,” he said.