How Ethiopia’s Gamble on Green Mobility is Quietly Driving Gas-Powered Cars Off the Road

Ethiopia is going green. The smog from internal combustion engines (ICE) is slowly lifting from the capital as the government cracks down on gas-powered vehicles. Sleek-looking Chinese electric cars, once a rarity, are becoming ever more common as demand for gas guzzlers takes a hit. Over the past year, partly fueled by rising petrol costs and a cocktail of pro-green policies, demand for most combustion vehicles has plummeted.

Brook Tewelde, a 26-year-old driver for ride-hailing companies, has been trying to sell a 1999 Toyota Yaris for the past six months. A year ago, the car mostly sought for its low fuel consumption might have fetched 1.2 million birr. Now, even with a 200,000-birr discount, it can’t find a buyer.

“I am shocked by how fast the price dropped,” Brook says.

The young driver had sold a Toyota Platz, a slightly less popular model, for around 1.2 million birr a year back, but only after watching its market value fall week after week.

“I had at one point rejected an offer of 1.7 million birr,” he says.” But I could never have imagined selling for less than a million.”

One of the main factors pushing prices down has been the rising cost of fuel. Every couple of months, the Ministry of Trade & Regional Integration (MoTRI) announces a gradual phasing out of fuel subsidies. Just two weeks back the price of a liter of benzene perked up by around 9% to reach 123 Birr, after another announcement. The price of a liter has increased by nearly 280% in less than four years from 31 Birr per liter. Diesel has also climbed in prices along a similar path to reach 116 Birr last week.

Some car dealerships picked on the trend early on and pivoted to selling EVs. Misgana Girma, General Manager of MG Car Dealership, says he no longer has any plans to sell gas-powered vehicles. The dealership currently has a few ICE vehicles left it is struggling to find buyers for.

“EVs will take over the city soon,” the manager told Shega.

He believes that anxieties about the reliability of EVs have been dissolved over the past few years. Misgana’s sentiment is partly reflected in the broader vehicle import figures. There are around 100,000 EVs in the country, representing nearly six percent of all cars operating in the country. A coverage forecasted to rise to 30% by 2030. Meanwhile, the price of EVs has continued to increase, with models of Chinese brands like BYD nearly doubling over the past two years.

Several policy prescriptions have nudged the increased adoption of EVs. Ethiopia’s government has exempted duties on completely knocked-down kits, while a little over 15% is levied on fully built EVs. The authorities' imposition of a complete ban on the import of gas-powered cars for personal use last year resulted in perhaps the most consequential outcome.

Sefiu Meknonen, owner of Safeautomarket, an online portal that hosts vehicle listings, says he has never seen such a price dip in all his years in the business. As a broker for several years who went on to open his dealership, he has had firsthand experience with the evolution of customer preferences.

“Buyers seem to be wanting only EVs these days,” Seifu told Shega.

He says the price of nearly every gas-powered vehicle has dropped by as much as 300,000 birr over the past nine months. As the price of a liter climbs, the market price of the vehicles seems to be dropping, he explained.

“With most people buying cars on credit, its clear why they would opt for a cheaper alternative,” Seifu says.

Ethiopia’s harsh crackdown on ICEs has as much, if not more, to do with macroeconomic priorities as it does with renewable aspirations. As Prime Minister Abiy Ahmed (PhD) addressed parliament two months back, he lamented the burden of expenses on the country’s shoestring budget. While his administration managed to collect around 560 billion Birr in revenues across eight months, fuel subsidies alone added up to around 72 billion birr. As a federal budget teetering close to a trillion birr, without the supplementary bump, calibrates a nearly 16% allocation for public debt servicing, expenditure management inevitably becomes crucial. Furthermore, the four-year economic program supported by the International Monetary Fund entails a gradual removal of energy subsidies.  With a complete phase-out of fuel subsidies scheduled for next year, prices for a liter could surge past the 200 Birr mark.

Experienced automotive engineers like Moges Negash point to the fact that most internal combustion engine vehicles have been pushed out of the affordability range for most Ethiopians. A 15% Value Added Tax (VAT); up to 100% excise tax, a 10% surtax, and 3% withholding tax add up to nudge the price of combustion engine vehicles.

“Affordability is ultimately the biggest determinant of consumer preferences,” says Moges.

As car brands like BYD, one of the biggest EV manufacturers in the world, KIA, and Hyundai potentially ramp up assembly in Ethiopia, combustion engine vehicles might take an even bigger hit. 

By each sunset, the hum of electric motors is increasingly replacing the rumble of engines. What began as a top-down policy directive may soon become an irreversible transformation in how Ethiopians move and how their economy functions.