EV Sales Boom As Ethiopia Bans Fossil-Fuel Car Imports

An anonymous reader quotes a report from the Financial Post: 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.