Africa’s ‘E’-volution and Ethiopia’s ban on fossil fuel vehicle import

In a dramatic turn of events, Ethiopia became the first nation globally to prohibit the import of fossil fuel-powered internal combustion engine (ICE) vehicles. From January 2024 onwards, only electric battery-powered cars will be allowed to be imported. This marks a significant step for Africa, which has long served as a dumping ground for old and used ICE vehicles and extremely dirty fuels from other parts of the world.

The primary driver for Ethiopia’s decision is the unaffordable cost of importing petrol and diesel and a  rising import bill. More than half of the total value of oil and petroleum products brought into the country is used to fuel vehicles. 

Technically, this is not a legal or regulatory ban on ICE vehicle imports, but the way the import duties have been designed and increased has virtually created one. The new import tax, which can rise up to 500 per cent, makes importing used vehicles — currently dominating the country’s on-road fleet — prohibitively expensive.

Meanwhile, a “new” car is defined as one less than three years old and having travelled under 4,000 km, but even these cars attract high import duties. The use of foreign exchange — meaning hard currency — to purchase diesel cars has been banned entirely.

In contrast, the import of electric and hybrid vehicles, as well as charging equipment, is duty-free. The new rule applies to all vehicles with a seating capacity of fewer than ten and it is expected to be extended to other vehicle types over the next three to four years.

Endale Yimer of the Ethiopian Customs Commission explained at a recent Pan-Africa regulators meeting, co-organised by the Delhi-based think tank Centre for Science and Environment and the National Environment Management Authority in Nairobi, Kenya that “this effectively allows only battery-powered cars in Ethiopia.” 

Locally assembled electric cars face only a 15 per cent value-added tax and a 3 per cent social welfare tax. While local assembly of ICE vehicles remains legal, but taxed at much higher rates, making their production and sale unattractive.

Thus, Ethiopia’s carefully crafted import policy, coupled with a lack of support for domestic manufacturing of ICE vehicles, has effectively freed the Ethiopian market from ICE cars from now on.

A big advantage of this move is that oil consumption will be replaced by cheaper, locally generated renewable electricity. Approximately 90 per cent of Ethiopia’s electricity comes from hydropower. The government expects substantial improvements in grid stability to support rapid electrification of the new fleet, as well as the gradual replacement of the existing one. However, this will require  commensurate expansion in the charging infrastructure to meet the new demand.

The new rule has created an opportunity for local manufacturing and assembly of electric vehicles (EV) and the government has planned tax incentives to support local assembly and manufacturing.

Ethiopia is poised to become a leader in the African electro-mobility market by creating opportunities for the importers and manufacturers of electric vehicles and infrastructure developers. The government has reportedly nearly tripled its target for EV imports by 2030.

Significance of this move

Africa accounts for 40 per cent of the global trade in used ICE vehicles, underlining the significance of Ethiopia’s move. As much as 85 per cent of imported vehicles are used ones. Traditionally, the United States, Japan and Germany have been major exporters of used vehicles to Africa. China, which did not allow used vehicle exports until 2019, is the new kid on the block. But now 27 Chinese cities and provinces are permitted to export second-hand cars. This is expected to lead to a deluge. 

The influx of used vehicles is slowing down advancement in emissions standards for vehicles, with most operating at pre-Euro III level. The progress is further stymied by poor quality fuel. Despite considerable progress in several countries towards 50 parts per million sulphur fuel, there is still no harmonisation across the continent.

As a result, even though Africa has one of the lowest motorisation rates —  43 vehicles per 1000 people as opposed to 197 per 1,000 people globally (2016-2020) — the population is experiencing very high exposure to toxic vehicular emissions.

Unequal battle

The importing countries on the African continent are trying hard to combat the dumping of used vehicles and dirty fuels. They are using tax measures to make older vehicles more expensive and encourage new vehicles, limiting the age of imported vehicles, linking emissions standard and fuel quality with imports and seeking inspection and maintenance solutions.

To combat dumping effectively, a regional platform for coordinated action across Africa is necessary.

It is also very clear that only unilateral action of the importing countries in Africa will not help unless exporting countries are made accountable. This came to sharp focus when trade restrictions on the import of used vehicles in Africa led to active opposition from the advanced countries.

The most blatant example is the opposition from the United Kingdom to Kenya’s ban on import of second-hand buses and trucks in 2022, on the grounds of violation of the Economic Partnership Agreement and bilateral pact between the two countries. 

Equally challenging has been the dumping of sulphur-rich dirty fuels from Europe to Africa. A few years ago, it came to light that several European trading companies were taking advantage of the lax regulations and fuel standards in Africa and selling high-sulphur fuels in Africa that are otherwise prohibited in European markets. West African markets are specially vulnerable. 

Questions were raised about whether this violated international waste laws such as the Basel Convention, which states that fuels not permitted in Europe's domestic markets should be treated as waste. It was reported that Belgium and the Netherlands were one of the exporting regions for toxic fuels.

This clearly requires a global platform to influence the export policies of the exporting countries and a global agreement to ensure that what is prohibited in the domestic markets of the advanced economies are not allowed for international trading. Domestic recycle policy and end-of-life disposal policies should address this matter in exporting countries. This requires a global strategy to prevent dumping. United Nation Environment Programme (UNEP) is assessing this matter. 

Leapfrog with electric mobility

The battle to clean up ICE vehicles and fuel will be difficult to win in Africa. That is why it is so encouraging to see the growth of the EV industry on the continent sidestepping ICE. The simplicity of EV technology and assembly has created opportunities for industrial development. Moreover, an easy access to minerals needed for batteries is also an opportunity to retain a substantial part of the value chain around critical mineral mining in Africa.

A thriving start-up economy is driving small-scale EV assembly locally, with electric mobility policies judiciously designed to target mass transport modes such as buses, paratransit, two- and three-wheelers, and commercial fleets to maximise emissions gains.

Global original equipment manufacturers are eyeing Africa for EV manufacturing and re-export opportunities. The continent is also importing used EVs, currently representing 1.4 per cent of global used EV trade.

In some vehicle segments the African continent is already showing leadership, especially in the bus segment and in the electrification of some of its largest bus rapid transit systems (BRT). The BRTs in Lagos, Johannesburg, Dakar, Dar-e-Salam, among others, have started to electrify bus fleets. The biggest win-win is the fully electric BRT system in Dakar, Senegal — the only of its kind in the world — with 144 articulated buses carrying 300,000 passengers per day using solar-generated renewable energy.

Even innovative funding strategies are evolving rapidly, especially in informal paratransit segments like boda-bodas, etc, which provide the bulk of the public transport services. Banks in Kenya are announcing funding portfolios. Bus operators in Nairobi have adopted innovative financing models such as ”pay-as-you-drive.”

This is the imperative and the unique pathway of the Global South. Africa is bound to deliver even more surprises to the world soon.