Electric Vehicle Sales Boom as Ethiopia Bans Fossil-Fuel Car Imports

(Bloomberg) -- Bethelhem Eshetie gave up driving her taxi two years ago. The rising cost of gas and the spare parts needed to keep her old car on the road meant that she couldn’t earn enough to make ends meet. “It was no longer worth it,” she said. Six months later, though, she was back on the road, this time in a brand new BenBen E-Star, an electric vehicle made by the Chinese carmaker Chang’an.

Unlike the second and third-hand vehicles that make up most of the traffic in Addis Ababa, the EV is new, reliable, and relatively affordable to run. “I like the car’s comfort, its air conditioning system,” she said. “And not having to go to the repair shop regularly.” 

In 2024, the Ethiopian government banned the import of fossil fuel-powered vehicles and slashed tariffs on their electric equivalents. It was a policy driven less by the country’s climate ambitions and more by fiscal pressures. For years, subsidizing gasoline for consumers has been a major drag on Ethiopia’s budget, costing the state billions of dollars over the past decade. The country defaulted on its sovereign bonds in 2023 after rising interest rates drove up the costs of servicing its debts, and it received a $3.4 billion bailout from the International Monetary Fund the following year. 

In the two years since the ban on internal combustion engine vehicles, EV adoption has grown from less than 1%  to nearly 6% of all of the vehicles on the road in the country — according to the government’s own figures — some way above the global average of 4%. 

“The Ethiopia story is fascinating,” said Colin McKerracher, head of clean transport at BloombergNEF. “What you’re seeing in places that don’t make a lot of vehicles of any type, they’re saying: ‘Well, look, if I’m going to import the cars anyway, then I’d rather import less oil. We may as well import the one that cleans up local air quality and is cheaper to buy.’”

For decades, Ethiopia’s high import tariffs on vehicles put new car ownership out of the reach of most of the country’s population. Per capita gross domestic product is only about $1,000, and even by the standards of low-income countries, it has among the lowest car ownership rates. At 13 vehicles per 1,000 people, it’s a fraction of the African average of 73. With few cars manufactured in the country, the vast majority are imported, and most are bought used. 

The government’s import policy has upended the market. In parallel, tariffs for EVs were dropped to 15% for completed cars, 5% for parts and semi-assembled vehicles, and zero for “fully knocked down” — vehicles shipped in parts and assembled locally. That has made new EVs cost-competitive with old gasoline cars.

At one of Hallel Cars’ showrooms in central Addis Ababa, a Seagull hatchback made by the Chinese carmaker BYD sells for 3.6 million Ethiopian birr ($23,000), while a BYD subcompact SUV Yuan Up costs 4.9 million Ethiopian birr. Before the import ban, a secondhand compact Suzuki Dzire gasoline sedan cost more than 4.2 million birr.

“The majority of our customers are those making the switch from fuel cars to EVs,” said Moges Negash, Hallel Cars’ sales and marketing manager.

Hallel sells Toyota, Honda and Citroën EVs too, but models from BYD — which last year surpassed Tesla as the world’s biggest seller of EVs — dominate its showroom. Other dealerships around the city sell Chang’an vehicles, as well as those from Volkswagen and the Vietnamese manufacturer VinFast.

Although the price tag is still relatively high for a country where incomes are low, middle class consumers find it easier to get credit to buy new EVs than they did for secondhand gas-powered ones, which banks often wouldn’t lend against.

“Banks are reluctant to provide consumer credit for purchase of vehicles that have an uncertain fate,” said Abdulmenan Mohammed, a financial analyst based in London who covers Ethiopian banks. “EVs are a new technology and increasingly being used in the country, so it’s a better opportunity for banks to provide credit.”

For the government, the growth in EV sales is a vindication of its import policy, which in turn has been made possible by its investments in electricity infrastructure. The Grand Ethiopian Renaissance dam, completed in 2025 at a cost of $5 billion, produces 5,150 megawatts of power. Combined with other generating assets, including wind farms and solar, the country has excess generation capacity, which it sells to neighboring Kenya, Tanzania and Djibouti. 

The price of delivering power to Ethiopian customers is about $0.10 per kWh, which is about half that of neighboring countries, and considerably less than the US average of $0.18 per kWh. Many Ethiopian consumers pay significantly less than that, due to consumption-based subsidies on electricity.

“Our transition to EVs is aimed at ensuring our energy sovereignty,” said Bareo Hassen Bareo, Ethiopia’s state minister for transport and logistics. “As a net importer of fuel, we are affected by global supply and price fluctuations. In contrast, EVs use electricity, which we produce locally and can price ourselves.”

The majority of the Renaissance dam’s financing came from Ethiopian banks, though China provided two tranches of loans in 2013 and 2019 worth a combined $3 billion toward electrical equipment and transmission lines that carry the dam’s power to major cities. The support wasn’t explicitly designed to help build markets for EVs, but China has become a global leader in exporting low-carbon energy technologies, from power generation through to vehicles.

“China is a leading nation in EV adoption and technology, particularly in battery advancements, making collaboration with China ideal for us,” Bareo said. “However, we are also open to working with any country.”

Chinese companies are also heavily involved in Ethiopia’s nascent EV manufacturing business, which the government hopes will grow on the back of its import tariffs and other support mechanisms. 

At a plant at Sheger City, about 40 kilometers from the capital, workers at Belayneh Kindie Group’s factory installed a battery in a 15-seat minibus before sending it out for a test drive. On the factory floor, three dozen vehicles were lined up in various states of completion, with workers installing their seats, floors, and windows. Before the finished minibuses — which are commonly used as shared taxis in Ethiopian cities — are sent to customers, they are checked by engineers. That day the inspection involved staff of the Nanjing Golden Dragon Bus, the Chinese EV company that designed and produced the parts for the vehicles. 

BKG Manufacturing launched in 2018 assembling fossil fuel-powered cars. Now it assembles electric vehicles in most categories, keeping fossil fuel engines only for heavy-duty trucks. To test the demand, the company imported some electric cars, “and the market reaction was incredible,” Besufekad Shewaye, the company’s chief executive officer, said. “As a result, we decided to establish assembly plants.”

BKG already has two factories and has acquired land for a third, he said. The company’s biggest customer is the Addis Ababa City Administration, which has purchased 150 minibuses and 100 large buses as part of a government policy to use investments in electric public transport to support manufacturers.

“I estimate the potential market for gig worker two-wheelers is between 150,000 and 200,000 units once the ecosystem matures over the next 10-15 years,” Yuma Sasaki, founder of Addis Ababa-based electric two-wheeler startup Dodai, said. Sasaki spent two years convincing government officials that the vehicles were safe and cheap. He said his company has now assembled and sold more than 1,800 Chinese electric bikes.

There are now 17 EV assembly plants in Ethiopia, according to Bareo, and the government aims to have 60 by 2030. 

The market is too small for full-scale manufacturing plants “but assembling EVs is a huge value add,” says Adam Ward, co-lead of the International Energy Agency’s Africa investment portfolio. “So even if Ethiopia doesn’t manufacture everything from scratch, just assembling is great for the country’s economy.”

Manufacturing in Ethiopia is challenging. As of 2023, the sector contributed less than 7% of the country’s gross domestic product, with a difficult regulatory environment and a high cost of capital constraining its growth. And although the pace of EV adoption has been high, it’s come from a low base. There are only 1.7 million vehicles in Ethiopia, for a population of 130 million.

The figures on Ethiopia’s EV penetration of more than 100,000 vehicles come from the government, and independent sources are rare. The US International Trade Organization put the figure at 30,000 before the fuel-powered vehicle ban was brought in. 

“Ethiopia had a distorted car market and there was a huge suppressed demand among the few who could afford to buy cars,” said Rose Mutiso, science adviser at the Energy for Growth Hub, a thinktank. “That’s why the policy change has led to such a surge in EV sales, but I don’t think the pace of sales can be sustained.”

While the charging network is growing, it’s a long way from what’s needed. The government has mandated that all fuel stations and car showrooms must have EV chargers, which Bareo said has led to 500 being installed, mostly in Addis Ababa, where the majority of EVs have been sold. However, the capital alone needs 1,000 chargers, he said, which is why the government has put out new requirements for new housing developments, parks and hotels to deploy chargers too.

The vast majority of existing chargers still take between four to six hours to fully replenish an EV battery, and there are only a handful of fast chargers that can charge the battery in as little as 30 minutes in the country. Ethio Telecom has deployed three fast and ultra-fast charging stations in Addis Ababa, each equipped with 16 charging ports, while TotalEnergies is integrating EV charging points into its gas stations throughout the city.

Despite Ethiopia’s success in building generation capacity, access to electricity is patchy outside the capital. World Bank figures show that only 55% of the population has access to electricity, though people in big cities have near universal access. That means it could be hard to sustain a broader transition to EVs, according to a 2025 report by the Energy for Growth Hub.

“Only two African countries have built a substantial car manufacturing industry: South Africa and Morocco,” said Mutiso of Energy for Growth Hub. “So Ethiopia has to right-size its ambition on EV manufacturing and focus on high-value assembling.”

Those ambitions remain high. Ethiopia — which will host the United Nations’ annual climate summit COP32 in 2027 — has made increasing the rate of electrification in transport a key part of its most recent climate plan, which was submitted in 2025. It aims to reach 500,000 EVs by 2032. In the previous plan submitted in 2021, there were only two mentions of electric vehicles in the entire document.

For the early adopters who have made the switch to EVs already, there is a growing community. Bethlehem, the taxi driver, has become more than just a user, and is now a bona fide EV influencer, using her 180,000-follower TikTok account and a Telegram channel with 3,000 members to evangelise for electric vehicles. “When people see me driving an electric vehicle, they often stop and honk their horns to ask for details,” she said.

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