Auto Assemblers On Verge Of Collapse As Gov’t Pulls Break On Component Imports

Dozens of domestic vehicle assemblers say they are on the verge of shutting down their plants as a result of an abrupt decision from officials at the Ministry of Industry prohibiting the import of components used to build fuel-powered cars.

A recent memo from the Industry Minister to the central bank, Customs Commission, and the Transport and Finance ministries declares that components for the local assembly of combustion engine vehicles will no longer be allowed to enter the country.

Melaku and policymakers at the Ministry want to see Ethiopia’s fledgling vehicle assembly industry shift towards electric vehicles (EVs) and hybrids, but investors who spoke to The Reporter caution that a sudden transition is infeasible and could wind up costing thousands of jobs.

“Existing local fuel-powered car assemblers have been instructed to shift to assembling only EVs and hybrids. This aligns with Ethiopia’s policy of transitioning from fuel cars to cars that only use renewable energy,” Tilahun Abay, an advisor at the Ministry of Industry, told The Reporter.

Since the government enacted its ban on the import of combustion engine vehicles last year, the number of EVs on the country’s roads has surged, with a report from the Transport Ministry putting the total at more than 42,000 as of March 2025.

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“However, the continued operation of local fuel car assemblers is compromising this overarching policy. Therefore, any import of components used for local fuel car assembly is ordered to cease,” reads Melaku’s memo.

While the government sees the proscription as a key part of its overarching green transition policy, the operators of more than 30 assembly plants say the move is a death sentence for an industry that had just begun to reap the fruits of decades of struggle when the government kicked off its green transport drive last year.

Ahmedin Mohammed serves as president of the Association of Automotive and Sparepart Manufacturers—an industry lobby group—and heads O’clock Motors, a company that runs a sizable vehicle assembly plant on the outskirts of Addis Ababa.

He described the dilemma faced by assemblers such as O’clock, Marathon Motors, and Belayab Motors to The Reporter.

“We’ve already been stuck since the government banned the import of fuel cars. Now, it has proscribed domestic vehicle assemblers. This is a devastating blow to investors who have put huge amounts of money, skill, energy, and manpower into the business,” said Ahmedin.

He argues the government’s instructions to switch over to EV and hybrid assembly are simply not feasible.

“We have a 20 percent or more profit margin in assembling fuel cars. Assembling EVs locally has no profit margin. Importing [built-up] EVs is much more profitable than importing EV components assembling them here,” Ahmedin told The Reporter.

He revealed that assembly plants are sitting idle, but still paying employee salaries including for the automotive experts who run the assembly lines. O’Clock Motors alone employs around 100 people, and Ahmedin says the factory can only stay open for three more months at best.

“All auto factories are on the verge of extinction. Many are already cutting jobs,” he told The Reporter.

Another problem, according to Ahmedin, is the lack of regulation and control around EV imports in Ethiopia.

“Second-hand EVs are flowing in from China and elsewhere. There are so many types of EVs coming in, but Ethiopia has no standards as to which ones should be adopted,” he said.

Ahmedin observes that many EV buyers lack access to the after-sale services offered by local assemblers. He also expressed doubts about the government’s ambitions to produce batteries for EVs domestically.

“Which EV would we produce [batteries] for? There isn’t a selective approach. There is also no manpower on EVs,” said the Association President. “Unless the government reverses this policy, O’clock will shut down within a maximum of three months. Other assemblers are also on the verge of closing.”

He argues the small number of cars assembled by domestic plants each year (around 1,000 cars) is negligible and should not have a bearing on the policy.

“This does not affect or compromise the policy. The government should allow them to continue,” said Ahmedin.

He urges the government to encourage and incentivize local EV assembly rather than EV imports.

A study submitted to the Ministry of Industry by Ahmedin’s lobby group, which counts more than 30 members, recommends tax exemptions and other incentives for assemblers, while calling for officials to introduce regulatory mechanisms for EV imports.

“For instance, there are currently no EV spare parts in Ethiopia. We recently imported a single part for 1.2 million Birr, via air transport. Auto factories have invested a huge amount of resources. Destroying all that at once is a bad decision,” said Amhedin.

He foresees that investors will be reluctant to venture into EV assembly without a solid regulatory framework.

“Unless Ethiopia introduces its own selective, study-based policy for EV adoption, investors cannot front the cash. This is also difficult for FDI. There are innovative engineers and entrepreneurs in Ethiopia. If Ethiopia has a proper EV policy, they could engage in producing EV spare parts. EVs have software that also needs to be updated periodically. There is no such trend in Ethiopia. EV imports in Ethiopia are unregulated,” said Ahmedin.

The Association and the managers of local assembly plants are scheduled for a sit down with officials at the Ministry of Industry next week.