Why are cars so expensive in Ethiopia? – BBC News – BBC.com

Cars for sale in Addis Ababa, Ethiopia

Owning a car for many Ethiopians – even those with ready cash to spend in one of the world’s fastest-growing economies – remains a pipe dream.

“I have been saving for nearly four years now, and I still can’t afford to buy even the cheapest vehicle here,” a frustrated Girma Desalegn tells me.

He has been shopping around for a whole week in capital, Addis Ababa, and has still not found an affordable car.

He is looking to buy a second-hand car imported from the Gulf states or Europe – but even they are prohibitively expensive because the government classifies cars as luxury goods.

This means even if a vehicle is second hand, it will be hit with import taxes of up to 300%.

“I have a budget of $15,000 (£12,300) and had expected that with that I could buy a decent family car.

“I don’t want to buy the Toyota Vitz,” he says pointing to a row of small hatchbacks that have now become popular on Ethiopian roads.

These cost about $16,000 in Ethiopia; in neighbouring Kenya the same car costs not more than $8,000.

It seems little wonder that Ethiopia has the world’s lowest rate of car ownership, with only two cars per 1,000 inhabitants, according to a 2014 Deloitte report.

Henok Demessew, who has been running a car import and sales business in the capital, blames taxation.

“If it was not for that, we would have been able to import better cars either from Europe or America. But in order to make any profits we have to sell cars at such high prices.

“On top of the cost of shipping the cars from say from Dubai via Djibouti, we have to deal with multiple taxes to the government, making this one of the toughest businesses to be in, even though it’s seen as lucrative.”

Tax breaks for local plants

The Ethiopian Revenues and Customs Authority says both commercial and private vehicles imported into the country can be subjected to five different types of taxes.

However, despite the heavy tax burden there is a rise in the numbers of car imports.

In 2016, government records show that 110,000 cars were imported to Ethiopia, an increase of more than 50% on the previous two years.

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