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Vehicles are the number one export from Korea to the Horn of Africa, especially in Sudan and Ethiopia. Countries in the Horn have more vehicle imports than exports. Ethiopia imports while Sudan exports the most vehicles. Countries in the Horn had 928,994 registered vehicles in 2014. Ethiopia had the largest number of registered vehicles, 478,244, and a 6% annual growth rate.
New commercial vehicle sales are driven by construction, agri-business and retail sectors and fuelled by the country’s economic growth. Government purchases drive the demand in passenger vehicle sales. In 2015, Ethiopia had seven domestic assembly plants.
New investors in the manufacturing sector in Ethiopia, including automotive, are exempt from paying income tax for five years if:
- They export more than 50% of their products or services, or if
- They supply more than 75% of their products to an exporter as a production input.
Potential entry strategy for new investors:
- Set up an assembly plant in Ethiopia or Sudan focused on exporting.
- Transport manufactured or assembled products from Ethiopia via Djibouti or Eritrea. Consider components / associated products: Korean tyre manufacturers Nexen and Hankook are popular in Africa, but currently only have a South African presence.
Case Study: Peugeot automobile plant in Ethiopia
Investment value: USD 1.2M
Investment type: Automobile assembly plant
Project completion date: 2016
- In 2016, French car maker PSA (Peugeot and Citroen) and local auto manufacturer Mesfin Industrial Engineering (MIE) partnered to set up a USD 1.2 M Peugeot assembly line in Ethiopia as part of the existing MIE factory.
- The plant, with a production capacity of 1,200 vehicles a year, is expected to produce Peugeot 2008, 301 and 208 models.
- Beyond the local Ethiopian market, they aim to sell the cars in neighboring countries like Djibouti and Somalia.
Current Korean vehicle brands with a presence in Africa
- Hyundai Motor Company (Seoul): South Korea’s biggest automotive manufacturer
- Strong presence in Africa and other overseas markets: in 2014, Hyundai established an assembly plant in South Africa and recently announced a USD 3.1B investment in the USA.
- In 2016, Hyundai produced the third largest number of vehicles globally, a year after selling its tenth million vehicle in the USA.
- Sudan already has a basic assembly plant.
- Korea’s oldest automotive manufacturer produces more than three million vehicles annually from 14 manufacturing and assembly operations in five countries.
- In Africa, Kia has set up assembly plants in Nigeria and is interested in manufacturing in Ethiopia and Algeria.
- In 2016, Kia opened a USD 1B production facility in Mexico capable of producing one car every 53 seconds.
Korean deals in the automotive sector