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In a bid to expand its market in sub-Saharan Africa, German automaker, Volkswagen has signed a memorandum of understanding (MoU) with the government of Ethiopia.

The agreement will lead to the establishment of a car assembly plant using locally manufactured components for the development of an automotive industry in the East African country.

In the presence of the German president, Frank-Walter Steinmeier, the agreement was signed by Abebe Abebayehu, Commissioner of Ethiopia’s Investment Commission (EIC) and Thomas Schaefer, Head of Volkswagen in the Sub-Saharan region.

Volkswagen is definitely keying into Ethiopia’s economic progress which is fast-paced. In the last decade, the country’s GDP has been above 8 percent, which is one of the highest globally. Under the G20 compact, Ethiopia remains a primacy and target nation for Germany, the company said in a statement.

Speaking on the agreement, Schaefer stated that Ethiopia being “one of the fastest growing economies, and with the second highest population on the continent, is an ideal country to advance our sub-Saharan Africa development strategy.

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

The planned expansion identifies four key areas to enable the development of the Ethiopian automotive industry – the establishment of a vehicle assembly facility; localization of automotive components; introduction of mobility concepts, such as app-based car sharing and ride hailing, as well as the opening of a local skills development training centre.

Thus, Volkswagen will work closely with Ethiopian higher education and training institutions for skills development and capacity building of local talent.

“Ethiopia is in a remarkable economic, political and social transformation that puts inclusive, sustainable growth and private sector development at its heart,” said Abebayehu, the Commissioner of Ethiopia’s Investment Commission.

“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,” he added.

It would be recalled that executives of the company visited Ethiopia in October 2018 and met with Prime Minister Abiy Ahmed.

Following Ghana and Nigeria, who both signed MoUs with Volkswagen in August 2018, Ethiopia becomes the third sub-Saharan African nation to sign an agreement with the auto giant.

In Nigeria, Volkswagen implemented a phased approach of vehicle assembly with long term view of establishing Nigeria as an automotive hub in West Africa. In the meantime, the carmaker plans to establish a vehicle assembly facility and conduct a feasibility study for an integrated mobility solutions concept in Ghana.

“Our sub-Sahara Africa strategy is gaining momentum with the signing of the third MoU in the last six months,” noted Schaefer.

Volkswagen is a German automaker founded in 1937 and is headquartered in Wolfsburg. It is the flagship marquee of the Volkswagen Group, one of the largest automakers by worldwide sales. The company has been manufacturing vehicles in South Africa since 1951 and also has vehicle assembly operations in Algeria, Kenya and Rwanda.

Under its Transform 2025+ brand strategy, Volkswagen is strengthening its regional operations and focusing on new up-and-coming markets such as Africa, where the sub-Saharan region plays an increasingly important role.

Although the continent’s automotive market is comparatively small today, the region has a bright look-out to develop into an automotive growth market of the future.

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