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An automotive industry begins: Volkswagen signs Memorandum of Understanding with Ethiopian Government

2019-01-29 10:14
VW Dealership

Image: iStock

Volkswagen has signed a Memorandum of Understanding (MoU) with the Government of Ethiopia to collaborate and deliver a joint vision for the development of an automotive industry in the country.

The MoU was signed by Thomas Schaefer, Head of the Volkswagen Sub-Sahara Africa Region and Commissioner of the Ethiopian Investment Commission (EIC), Abebe Abebayehu.

Paving the way

The MoU was signed in the presence of the Ethiopian Minister for Finance and Economic Cooperation, Ahmed Shide and Frank-Walter Steinmeier, President of the Federal Republic of Germany, who is on a state visit to Ethiopia.

READ: BAIC Group announces R11-billion SA plant set to go live in 2018 Q4 - Job boost for locals, vehicle production to begin

The signing of the MoU paves way for Volkswagen and the Ethiopian Government to commence a high-level and technical collaboration which is integral to the development of an automotive industry and policy framework.

The MoU identifies four key pillars as important for the development of the Ethiopian automotive industry. These include the establishment of a vehicle assembly facility, localisation of automotive components, introduction of mobility concepts such as app-based car sharing and ride-hailing as well as the opening of local skills development training centre.

VW Memorandum of Understanding

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Volkswagen and the Government of Ethiopia both undertook to expedite the reassertion of the vision by drawing up timelines and key milestones for the project.

Scale and efficiencies

Furthermore, Volkswagen undertook to draw upon its vast global experience in global supply chains in the automotive industry in anticipation that the project will lead to the development of an automotive industry in the country.

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In turn, the Ethiopian Government committed to support the establishment of specialised clusters owing to the economies of scale and efficiencies realised through the project.

The Ethiopian Government has acknowledged the pivotal role played by trainable labour force in creating a thriving and competitive automotive industry. As such, Volkswagen will work closely with the Ethiopian higher education and training institutions for skills development and capacity building of local talent.

Ethiopia becomes the third country in Sub-Sahara Africa to sign a Memorandum of Understanding with Volkswagen in the last six months. It follows Ghana and Nigeria who both signed MoUs with Volkswagen in August 2018.

'Gaining momentum'

In Ghana, Volkswagen undertook to establish a vehicle assembly facility and conduct a feasibility study for an integrated mobility solutions concept. In Nigeria, Volkswagen undertook to implement a phased approach in relation to the assembly of vehicles initially from assembly kits with long term view of establishing Nigeria as an automotive hub in West Africa.

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"Our Sub-Sahara Africa strategy is gaining momentum with the signing of the third MoU in the last six months. We are grateful for the support and vision of the Ethiopian Government in identifying the automotive sector as one of the key manufacturing industries that can help the country to realise its Vision 2025 goals," Schaefer commented.

"As one of the fastest growing economies, and with the second highest population in the continent, Ethiopia is an ideal country to advance our Sub-Sahara Africa development strategy.

"Additionally, Volkswagen intends on tapping into existing expertise and strategic resources in Ethiopia to establish a thriving automotive components industry," he added.

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"Ethiopia is in a remarkable economic, political and social transformation that puts inclusive and sustainable growth, and private sector development, at its heart," Abebe Abebayehu, Commissioner of the Ethiopian Investment Commission (EIC) said.

With a fast growing economy and stellar performance on FDI inflow, Ethiopia is asserting itself as a competitive and preferred location of choice for investment.

Market leader

This MoU signing with Volkswagen is yet another testimony that Ethiopia is open for business. Through this partnership, we hope to advance a joint vision for the development of a competitive, vertically integrated and sustainable automotive industry. The Government of Ethiopia stands ready to effectively translate this partnership into concrete actions and actual investment.

Volkswagen has been manufacturing vehicles in South Africa since 1951 and has been the market leader in passenger cars for the past eight consecutive years. 

Volkswagen also has vehicle assembly operations in Algeria, Kenya and Rwanda. Rwanda has an Integrated Mobility Solutions business which currently offers Community Car Sharing and shortly to be launched Ride Hailing.

VW Dealership

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Under its Transform 2025+ brand strategy, Volkswagen is strengthening the regions and focusing on new up-and-coming markets. Alongside North and South America as well as China, the Sub-Sahara Africa region plays an increasingly important role. 

Although the African automotive market is comparatively small today, the region could develop into an automotive growth market of the future. Africa has been identified as the last frontier for the automotive industry.

Ethiopia is a priority and focus country for Germany under the G20 Compact with Africa initiative.

"Volkswagen welcomes the G20 'Compact with Africa' initiative in Ethiopia. The German Government has been very supportive of our expansion strategy into Sub-Sahara Africa. We are as committed to the success of Africa as they are," concluded Schaefer.


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