Ethiopia: Import ban on gasoline powered personal vehicles remains

In a groundbreaking move, Ethiopia has become the first country in the world to impose an immediate ban on the import of gasoline powered personal vehicles. This bold decision, announced several months ago, marks a significant shift in the country’s approach to transportation and energy policy.

The ban was driven by Ethiopia’s substantial fossil fuel import bill, which exceeds $5 billion annually and heavily strains the country’s foreign currency reserves. Additionally, the move aims to take advantage of Ethiopia’s growing electric production capacity. With the recent activation of the Grand Ethiopian Renaissance Dam (GERD), which adds approximately 15,500 GWh of clean electricity to the national grid, Ethiopia now has ample renewable energy to offset the cost of importing fossil fuels. 

There is no better time than now to boldly begin the electric transition, particularly as the more of these vehicles become affordable. Recent news of China’s overcapacity in EVs and the import barriers placed on them by U.S and E.U means Chinese producers will seek to offload these cars in global south markets, including Africa, Middle East, South Asia, and South America. This provides a unique opportunity for these countries to transition towards EVs. 

This week, Ethiopia unveiled major economic policy reforms, including:

• Transitioning to a market-based foreign exchange system, allowing banks to freely trade currencies, and limiting National Bank of Ethiopia (NBE) interventions.
• Eliminating the requirement for exporters to surrender foreign exchange to the NBE, thereby increasing FX supplies for the private sector.
• Lifting import restrictions on 38 product categories, though the ban on gasoline powered vehicles remains in effect. Import restrictions on capital account outflows continue.

The ban on gasoline vehicles, including fully built cars and three-wheelers, aims to reduce the import of such vehicles, thereby decreasing demand for foreign currency and fossil fuels. Despite the restriction, imports of electric vehicles (EVs) and EV kits have surged, supported by a reduction in import duties and taxes for these vehicles.

In a recent clarification, the Finance Ministry reiterated that while imports of fully gasoline vehicles are prohibited, knocked-down kits for local assembly are still permitted. This policy shift supports the local assembly of EVs over gasoline vehicles, aligning with global trends and encouraging investment in EV production.

However, the abrupt nature of the ban has faced criticism from some Ethiopians who point out the lack of public charging infrastructure, service centers, and trained technicians for EVs. Maintaining these vehicles has been challenging due to a lack of local expertise and adequate support infrastructure. New owners struggled with repairs, having to rely on online resources and a manual in Mandarin, and his employer incurred extra costs for installing charging points due to the city’s insufficient public charging infrastructure.

Despite these challenges, the Ethiopian government remains committed to its ambitious green energy transportation goals, which it acknowledges will take some time to fully be adequate.