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Only about 2.83% of capital invested in climate-related startups in Africa from 2019 through Q1 2023 went into logistics companies, including electric vehicle startups. This logistics brief focuses on EVs as part of Renew Capital's series on climate tech in Africa.
Making electric vehicles a viable solution for the African market
Approximately $2.15B was invested in climate deals in Africa from 2019 to Q1 2023. Only 2.83% of that capital went into logistics and transport, which includes electric vehicles.
(Source: Renew Capital analysis of publicly reported deals tracked in “Africa: The Big Deal - Startup Deals Database”)
Investors closed 22 startup EV deals from 2019 to Q1 2023. Kenyan companies accounted for 36% of these funding rounds.
(Source: Renew Capital analysis of publicly reported deals tracked in “Africa: The Big Deal - Startup Deals Database”)
While EV investments peaked in Africa in 2022, we are not aware of any EV deals that have been reported in Africa to date in 2023.
(Source: Renew Capital analysis of publicly reported deals tracked in “Africa: The Big Deal - Startup Deals Database”)
EV Initiatives by the Government of Rwanda
An earlier logistics brief highlighted challenges associated with scaling EVs in Africa using Rwanda as a case study. The Rwandan government has invested heavily in sustainable infrastructure and e-mobility. While private investments have been made to grow e-mobility solutions throughout Rwanda, the government has created a slate of incentives to promote investment in e-mobility solutions:
- Low charging costs, especially between the off-peak hours of 11 pm to 8 am. Tax breaks on imports of any e-vehicles, equipment, or materials required to develop charging infrastructure
- Public land allocated to companies setting up charging stations for no cost/rent-free
Despite these government initiatives and private sector investments, the current challenges EVs face in Rwanda underscore challenges that will likely prevent the proliferation of EVs throughout sub-Saharan Africa in the near term. High entry cost to purchase, inadequate charging infrastructure and poor road infrastructure are key pieces missing that will potentially limit the possibility of EVs taking over the African market.
While larger EVs including Volkswagen’s ID.4 will likely be imported to Rwanda and are already being sold in Ethiopia to deal with the problem of poor infrastructure, the majority of Rwandans and sub-Saharan Africans cannot afford to own these expensive vehicles.
Interestingly though, given rising fuel costs in Ethiopia and the relatively low cost of electricity in East Africa’s largest economy, EVs may be able to make a splash.
An Ethiopian EV Cost Comparison Experiment
An in-house experiment conducted by some of Renew Capital's Ethiopian team members determined that the current gas cost of operating a fuel Peugeot 6 Seater SUV (at 62 ETB/KM) was four times more expensive than the comparable EV Volkswagen ID6 in the Ethiopia market.
The purchase price of both vehicles is comparable at 5.5M ETB (approximately $105K). This is despite recent incentives placed on EV purchases by the Ethiopian government which only require a 15% import tax for fully assembled imported vehicles. This example underscores that while upper-class individuals in Ethiopia can afford the $105K price tag, many Ethiopians will not be able to access them over the long term.
Therefore, the future of EVs in Ethiopia depends on the ability of car manufacturers to create a smaller-sized EV more comparable to the Toyota Vitz or Platz, commonly driven vehicles by middle to upper-class individuals in Ethiopia. Still, with a Toyota Platz and Vitz priced at 1.6M ETB ($30K) and 1.2M ETB ($23K) respectively, even these vehicles in the current Ethiopian economy are considered a luxury. At the same time, electric motorcycles are making headway in Ethiopia’s neighboring countries including Kenya, Rwanda and Uganda.
For example, electric motorbikes could cost around $1,500, which is far cheaper than the cost to buy a smaller-engine-sized car like the Toyota Vitz or Platz.
At the same time, the transition to EVs in Ethiopia will not be without its challenges. One of the key barriers to adoption is the lack of charging infrastructure. Currently, there are only a handful of charging stations in Ethiopia, which limits the practicality of EVs for many people. In addition, high upfront costs and limited availability of EV models in Ethiopia are other obstacles to widespread adoption.
Despite these challenges, there is a reason for optimism. At least two Ethiopian organizations, including private companies, are working on installing the infrastructure required for charging widespread adoption of EVs. For example, in 2021, Ethiopian automotive company Marathon Motors partnered with Nissan to launch an electric vehicle pilot program in Ethiopia. As part of the program, Marathon has installed charging stations at its dealerships and service centers. Likewise, at the beginning of 2023, Cardinal Industrial PLC announced its plans to build 500 EV charging stations across Ethiopia over the next year.
Moreover, as part of its 10-year economic development plan, the Ethiopian government intends to import 4,800 electric buses and 148,000 electric cars by 2030.
Bottom Line
EVs have not historically received adequate investment in the African market. At the same time, the EV market needs meaningful innovation in order to make electric vehicles a viable solution for Africa. Aside from motorcycles, very few sub-Saharan Africans have the ability to purchase and use EVs due to their high entry cost and limited charging infrastructure. Importantly, EVs in public transportation could be a more durable solution for EVs in Africa than personal vehicles.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.
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