The Role and Challenges of Vehicle
The Role and Challenges of Vehicle
The Role and Challenges of Vehicle
UNIVERSITY
ASSEMBLED IN ETHIOPIA:
By
May.2019
IN ETHIOPIA:
By
Administration (MBA).
May 2019
I hereby declare that this thesis entitled “The role and challenges of vehicle assembled in
Ethiopia: The case of Bishoftu Automotive Industry” was composed by myself, with the
guidance of my advisor, that the work contained herein is my own except where explicitly stated
otherwise in the text, and that this work has not been submitted, in whole or in part, for any other
I
Certificate
This is to certify that the thesis prepared by Milion Kiros Bahta entitled “The role and challenges
of vehicle assembled in Ethiopia: The case of Bishoftu Automotive Industry” and submitted in
fulfillment of the requirements for the Degree of Masters of Business Administration complies
with the regulations of the university and meets the accepted standards with respect to originality
and quality.
Signature: Date:
Thesis Advisor:
II
ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY
Certificate
INDUSTRY
By
Signature: Date:
External Examiner:
Internal Examiner:
III
Dedication
This Thesis work is dedicated to my friend, to Hadgu Abay Adal and my classmate Naizgi Desta.
IV
Acknowledgment
First and foremost I thank the almighty GOD, for having finally made this humble effort a
reality. I am very thankful for the contribution of many people during the course of this thesis
work. Without their help this thesis could not have been completed.
I want to extend my sincere appreciation to my advisor Dugasa Mulugeta (PhD), for his valuable
creative suggestions and critical comments, and for being endless enthusiastic from the
I wish to express my sincere appreciation to Bishoftu Automotive Industry, and all staff
members, for giving me an opportunity to observe and their cooperation in filling out
questionnaire, and provided very valuable information and data required for my thesis work.
Finally, I wish to express my warmest gratitude to my friends and my parents for their constant
support, help and love that made me possible to undertake the Post Graduate studies. Last, but
not least, I like to thank all my friends and colleagues, for their love, encouragement and support
V
Abstract
The main intention of this research is to analyze the role and challenges of locally vehicle
assembled in Ethiopia, the case of Bishoftu Automotive Industry. There are small numbers of
vehicle assemblers that are on operation, and they are struggling to make assembled vehicles
throughout the country which are already in operation. Thus, the researcher is encouraged to
study attentively and believes that it has to be studied and recognized the role and challenges of
vehicle assembly in Bishoftu Automotive Industry as soon as it is new insight. In recent year,
those automotive vehicle assemblies are emerging and transforming from vehicle importing
business to vehicle Assembling business. To address this research title, the researcher uses 75
randomly selected respondents and prepared questioner with interviews used for the purpose of
data collection, then primary and secondary data were collected. Descriptive method of data is
used to analyze the result in to positive and negative aspects then the findings are triangulated
by Qualitative and quantitative data. The finding indicates that, the vehicle assembly has a vital
role in regard to profit, economic role, employment opportunity, and technology transfer. The
reason for all major challenges on locally assembled vehicles are Brokers, attitude of the society
towards Second hand imported vehicle and Lack of skilled specialized man power though some
of the challenges that should be solved in the long run perspectives. Relevant recommendations
were given the ministry of industry as well as the policy making body of the government to give
due attention regarding giving privileges and arranging market lines on the economy.
VI
Tables of contents
Table of Contents page No.
Declaration ....................................................................................................................................... I
Certificate........................................................................................................................................ II
Dedication ..................................................................................................................................... IV
Acknowledgment ............................................................................................................................V
Abstract ......................................................................................................................................... VI
Tables of contents ........................................................................................................................ VII
List of Tables ................................................................................................................................ IX
List of Figures ............................................................................................................................... XI
CHAPTER ONE ......................................................................................................................... - 1 -
INTRODUCTION ...................................................................................................................... - 1 -
1.1 Back ground of the study ................................................................................................. - 1 -
1.2 Background of the organization ....................................................................................... - 3 -
1.3 Statement of the problem ................................................................................................. - 4 -
1.4 Objective of the study ...................................................................................................... - 5 -
1.4.1 General objectives........................................................................................................... - 5 -
1.4.2 Specific objective ............................................................................................................ - 5 -
1.5 Research question ............................................................................................................. - 5 -
1.6 Significant of the study .................................................................................................... - 5 -
1.7 Scope of the study ............................................................................................................ - 6 -
1.8 Limitation of the study ..................................................................................................... - 6 -
1.9 Definitions of key terms ................................................................................................... - 7 -
1.10 Organization of the study ................................................................................................. - 8 -
CHAPTER TWO ........................................................................................................................ - 9 -
LITRATURE REVIEW .............................................................................................................. - 9 -
2.1 Introduction .................................................................................................................... - 9 -
2.2. State of the automotive industry ............................................................................. - 13 -
2.3 The evolution of industry and industrial policy in Ethiopia ............................................ - 14 -
2.4 Major trends of world automotive industry ..................................................................... - 16 -
2.4.1 Global market dynamics............................................................................................ - 16 -
2.4.2 Establishment of global alliances............................................................................ - 16 -
2.4.3 Industry Consolidation .............................................................................................. - 16 -
2.5 Economics of automobile industry .................................................................................. - 17 -
2.5.1 Production ............................................................................................................... - 17 -
VII
2.5.2 International Trade .................................................................................................. - 19 -
2.5.3 Dynamics of Automotive Trade.............................................................................. - 20 -
2.6 Automotive sector in Africa ......................................................................................... - 22 -
2.6.1 A comparative look at Ethiopia, Kenya and Nigeria .............................................. - 24 -
2.6.2 Automotive Industry in Ethiopia ............................................................................ - 25 -
2.7 Policy environment ....................................................................................................... - 39 -
2.8 Factors affecting locally assembled vehicles in Ethiopia ................................................ - 43 -
2.9 The manufacturing process ........................................................................................... - 45 -
2.10 Automotive assembly ................................................................................................... - 47 -
2.10.1 Interior Auto parts and Accessories ........................................................................ - 49 -
2.11 Research gap analysis vision ......................................................................................... - 50 -
CHAPTER THREE .................................................................................................................. - 51 -
METHODOLOGY ................................................................................................................... - 51 -
3.1 Introduction ................................................................................................................... - 51 -
3.1.1 Research Design...................................................................................................... - 51 -
3.1.2 Sample size and sample techniques ........................................................................ - 51 -
3.2 Data Sources ................................................................................................................. - 52 -
3.2.1 Primary Data source ................................................................................................ - 52 -
3.2.2 Secondary Data sources .......................................................................................... - 52 -
3.3 Data Collection method ................................................................................................ - 52 -
3.3.1 Questionnaires......................................................................................................... - 53 -
3.3.2 Document and review ............................................................................................. - 53 -
3.4 Data Analysis................................................................................................................... - 53 -
CHAPTER 4 ............................................................................................................................. - 54 -
DATA ANALYSIS AND INTERPRETATION ...................................................................... - 54 -
4.1 Introduction ................................................................................................................... - 54 -
4.1.1 Respondents Profile ................................................................................................ - 54 -
4.1.2 Questionnaire analysis .............................................................................................. - 56 -
CHAPTER 5 ............................................................................................................................. - 69 -
CONCLUSION AND RECOMMENDATION........................................................................ - 69 -
5.1 CONCLUSION ............................................................................................................. - 69 -
5.2 RECOMMENDATION ................................................................................................ - 70 -
REFERENCES
APPENDIX
VIII
List of Tables
Table 2.4: Financial inclusion indicators source :( deloite Africa insights, 2016)………....……25
Table 4.4: competition between assembled vehicles with second hand vehicle…………………57
IX
Table 4.12: Main hindering the vehicle assembly industry………………………………….….62
X
List of Figures
XI
ACRONYMS
ACRONYMS
APCS- Armored personnel carries
FDRE-Federal democratic republic of Ethiopia
AMCE: Automotive manufacturing company of Ethiopia
BAI- Bishoftu Automotive Industry
SUV- sport utility vehicles
OICA- organization international des constucteursd‟ automobiles
OEM- Original Equipment Manufacturer
CKD- completely knocked down
SKD- semi Knocked-Down
CAD- Computer-Aided Design
CAE- Computer-aided Design
IMVP-International Motor Vehicle Programmed at
ICE- Internal Combustion engine
VER- Voluntary export restraints
CAGR- compound annual growth rate
EIC- Ethiopian investment commission
FBU- Fully Built-Up
GTP- Growth and Transformation Plan
AGOA- African Growth and Opportunity Act
FIAT- Fabbrica Italiana Automobili Torino
LCV- Light Commercial Vehicles
HCV- Heavy commercial Vehicles
XII
XIII
CHAPTER ONE
INTRODUCTION
Ethiopia is one of the land-locked countries in African Continent, being one of the African
uses mainly Djibouti port, which is located about 1000 km away from the capital City for import
and export of goods. Ethiopia does not manufacture automotive, construction Machines and
agricultural equipment locally at present, it import those from various countries of the world.
Automotive importing companies in Ethiopia are importing different types of Vehicles to the
country vehicle market. There is a need of discussion on major issues on the truck market trend
the country‟s economy. The overview of Ethiopia economical, geographical and cultural
condition including investment opportunities In relation to the automotive industry. The demand
for automobiles is mainly influenced and adversely or positively affected by Price and
The automotive industry will have immense contribution to the growth of the national
Economy if it is well addressed and supported with attractive incentives, Job creation market
Access and saving foreign currency. The major problems observed in the automotive sector are
in the areas of Government regulation, lack of adequate road infrastructure, absence of trained
manpower and lack of adequate financing facilities. The main objective of this study is to
examine the development of the automotive industry in Ethiopia and its contribution to the
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Overall economy in general. This tried to address only the development and market trend of
automotive industry in Ethiopia and the overall effect on the freight transport sector and
Performance. As it involves wide and complex issue, one should require detail analysis
Ethiopia is the second largest population in Africa comprising of more than 90 million people.
Comparing the vehicle a variable in Ethiopia‟s road with other countries of Africa, it could be
categorized with low number of vehicle. The number of registered vehicle in Ethiopia as of 2016
was 662,000. As the observation from the road, the trend of vehicle purchasing is petting created
from time to time. The increment of plate numbers shows that increment of vehicle in the road.
Ethiopia annually imports around 18,000 vehicles and the majority of which are dominated by
second-hand Toyota brand, according to 2015 study Deloitte Africa (South Africa international
research firm). Ethiopian modern vehicle assembly history dated back to the 1970‟s the Italian
joint venture with the then Ethiopian government. Bishoftu Automotive Industry is assembling
civilian and military vehicle products to local and to African markets. These are also other major
vehicle assembly companies like Mesfin Engineering assembly, Greeley Saba brand from china
and Peugeot from European, model. An addition belay as motors assembly FAW model from
china and Kia motors model from Korea. The vehicle assembly firms are producing the vehicles
to the market and are stated the vehicle driven on the road. The sector is at low level of
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1.2 Background of the organization
Bishoftu Automotive Engineering Industry is one of the Industries under FDRE Metals &
Engineering Corporation. The industry is located about 48 km from Addis Ababa, at Bishoftu
Town. It was originally constructed to render maintenance services for tanks, armored vehicles,
military vehicles, artillery weapons, optical devices, small arms, communication and control
equipment. Implementation of the project began in February 1984 and was interrupted in May
1991 following the fall of Derg regime. From 1991 up to 2008 the project work finalized and
overhauling of Tanks and Ural military trucks started. Again in 2008 project 40720 re-
organized under defense industry sector by the name of Bishoftu motorization engineering
complex. Bishoftu Motorization Engineering Complex (2008 to 2010) carried out overhauling of
Tanks, Armored Personnel Carriers (APCS), artillery materials, optical devices, communication
equipment, military trucks and generators. In 2010, the defense industry sector re- organized by
the name of Metals and Engineering Corporation separated from defense. From then; Bishoftu
under metals and Engineering Corporation. Today Bishoftu Automotive Engineering Industry is
the single largest vehicle manufacturer in Ethiopia, from light vehicle to heavy duty commercial
trucks, buses, special purpose vehicles, military trucks and APCS. In addition the industry works
overhauling and upgrading of Tanks and Armor Personnel carrier (Bishoftu automotive industry
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1.3 Statement of the problem
The major vehicle assemblers in Ethiopia are Bishoftu Automotive industry (BAI), Mesfin
Industrial Engineering and Belayab motors, among these prominent and dominating the local car
market at present is BAI. BAI assembles civilian commercial and passenger vehicles like buses,
pickups, sports utility vehicles (SUV) and trucks like the widely used Sino truck. BAI is locally
famous for its 30 and 50 passenger carrier blue Bishoftu buses that are being used as public
transport in cities like Addis Ababa; increasingly.BAI also exports some commercial vehicles to
Somali-land. It also assembles military equipment such as tanks and armored personnel carriers
(APCs) for the Ethiopian defense forces and African union peace keeping missions, maintains air
planes and produces locomotive trains. BAI has plans to assemble and manufacture motorcycles,
bicycle, light and heavy trucks and other vehicles as well. The available statistics indicated that
in 2015, only 160,000 vehicles were in use in Ethiopia to imply a car per 500 inhabitants making
the country to have the lowest motorization rate globally. It‟s estimated that annually, 18,000
vehicles are brought into Ethiopia‟s market most of which are second-hand vehicles. Passenger
vehicle sales are mainly driven by government while construction and agribusiness industries
control the sale of new commercial vehicles. The exportation and importation of used
commercial vehicles are dominant in Ethiopia and in 2015 the imports were valued at $875
million making it the most valued overall import. The Automotive manufacturing company
known as Bishoftu Automotive Industry (BAI) contributed much to the above revenue and saves
Through this all conditions there are only small numbers of vehicle assemblers that are on
operation, and they are struggling to make assembled vehicles throughout the country. From
them Bishoftu Automotive Industry (BAI) which is already in operation. Thus, the researcher is
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encouraged to study attentively and believes that it has to be studied and recognized the role and
Bishoftu Automotive Industry assembled allows Ethiopian vehicle industry to offer new
vehicles with reasonable and competitive price for the society. However, providing locally
assembled vehicles to society is not easy due to convenient and inconvenient reasons.
Therefore the main objective of this study is to examine the role and challenges of vehicle
Based on the problems stated in the study, the researcher develops the following research
questions:
The results and outcome of the study give awareness about the current growth of automotive
vehicle assembler organization, specifically in Bishoftu vehicle assembly to understand the role
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and challenges of vehicle assembly in Bishoftu Automotive Engineering Industry. Furthermore,
this study will assist an input for the policy makers and other researchers who will be interested
to conduct further study concerning the issue by offering valuable information to encourage
locally vehicle assembled industry throughout the country. This study may also a vital role for
developing countries like our country Ethiopia to enhance automotive industry, because of the
government transforms from agriculture to industry. Finally; the study may be gained new
insight from the research based on the facts found, the study may provide for Technical
managers, technicians, vehicle sellers are better to know about changes required and the
opportunity vehicle assembly industry direction to speed up the vehicle assembler organization.
industry is vital role opportunities as well as it also faces several challenges. However; theses
roles and challenges are not well studied and identified to promote growth and the economic
contribution of the vehicle assembly industry. Thus, the study focuses mainly on the role and
challenges locally vehicle assembled in Bishoftu automotive industry. The purposive sampling
methods minimize the general result and this research might not be generalized to all vehicle
This research depends on the data of few question and limited literature review on the area
automotive vehicle assembly specifically in Bishoftu automotive industry. The result could not
be considered as a fulfill study in detail on the role and challenges of the vehicle assembly in
Bishoftu automotive industry. The fact that the researcher is self sponsored the study focus only
in one research it may limit the study of the scope due to financial fund and time constraints.
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Despite this the investigation will suffered from a number of parameters which is data and
available documents in the vehicle assembler companies this factor redistricted to research in the
study area. The last but not the least time constraints of vehicle assemblers will be the limitation
of the study it will hardly possible to meet for the interview or to fill out the questionnaire upon
to our appointment. Lack of feedback respondents‟ willingness for cooperation also the other
single largest vehicle manufacturer in Ethiopia, from light vehicle to heavy duty commercial
trucks, buses, special purpose vehicles, military trucks and Armor Personnel carriers (APCS). In
addition the industry works overhauling and upgrading of Tanks and APCS (Bishoftu automotive
Government regulation: A rule of order having the force of law, prescribed by a superior or
competent authority, relating to the actions of those under the authority's control
(Janosik, R.1987).
Technology transfer: technology transfer also called transfer of technology (TOT), is the
process of transferring (disseminating) technology from the places and in groups of its
origination to wider distribution among more people and places (technology transfer Wikipedia,
2019)
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1.10 Organization of the study
Organization study was covered five chapters. Chapter one consist of background of the study,
statement of the problem, objective, significance, scope, organizational of the study. Chapter two
consists of literature review. The third chapter consists of methodology of the study. Chapter
four consists of Data Analysis and Interpretation of the findings and the final chapter five
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CHAPTER TWO
LITRATURE REVIEW
2.1 Introduction
By definition an automobile or car is a wheeled vehicle that carries its own motor and transports
passengers. The automobile was not invented in a single day by a single inventor. The history of
the automobile reflects an evolution that took place worldwide. It is estimated that over 100,000
patents created the modern automobile. You can point to the many firsts that occurred along the
way to producing the modern car; and with that goal in mind, highlighted below are articles,
biographies, time lines, and photo galleries related to the history of the automobile and its many
inventors. The automobile as we know it was not invented in a single day by a single inventor.
However, we can point to the many firsts that occurred along the way. It started with the first
theoretical plans for a motor vehicle that had been drawn up by both Leonardo da
The very first self-propelled road vehicle was a military tractor invented by French engineer and
mechanic; Nicolas Joseph (1725 - 1804).But cannot use a steam engine to power his vehicle,
built under his instructions at the Paris Arsenal by mechanic Brezin. It was used by the French
Army to haul artillery at a whopping speed of 2 1/2 mph on only three wheels. The vehicle had
to stop every ten to fifteen minutes to build up steam power. The steam engine and boiler were
separate from the rest of the vehicle and placed in the front. The following year (1770), Cugnot
built a steam-powered tricycle that carried four passengers.In1771; Cugnot drove one of his road
vehicles into a stone wall, making Cugnot the first person to get into a motor vehicle accident.
This was the beginning of bad luck for the inventor. After one of Cugnot's patrons died and the
other was exiled, the money for Cugnot's road vehicle experiments ended. Steam engines
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powered cars by burning fuel that heated water in a boiler, creating steam that expanded and
pushed pistons that turned the crankshaft, which then turned the wheels. During the early history
of self propelled vehicles both road and railroad vehicles were being developed with steam
engines. (Cugnot also designed two steam locomotives with engines that never worked well.)
Steam engines added so much weight to a vehicle that they proved a poor design for road
vehicles; however, steam engines were very successfully used in locomotives. Historians, who
accept that early steam-powered road vehicles were automobiles, feel that Nicolas Cugnot was
the inventor of the first automobile. The automotive industry is an important sector globally,
impacting global economic activity as a driver of growth, employment and income According to
industry a country, it would be the sixth largest economy in the world. It is one of the largest and
most advanced scale industries, in terms of output levels, direct and indirect employment,
management practices and manufacturing standard with 8.8 million direct employees among
automakers and their suppliers. In addition to the direct employees, about five times more are
employed indirectly in related manufacturing and service provision, such that an estimated more
than 50 million people earn their living from cars, trucks, buses and coaches .Its production and
sales have been and is a major indicator of the state of a country‟s economy and every country is
vying to be a part of it. There are eleven lead firms from three countries, Japan, Germany and the
USA, that dominate production in the main markets. The global automotive industry is currently
led by the main Original Equipment Manufacturer (OEMs) that is Toyota, General Motors,
Volkswagen, Ford, Honda, PSA, Nissan, BMW and Chrysler, which function in an international
competitive market. The industry is relatively fixed in its structure, its relationships, its
participants and influential players. An industry that, despite having many options developed in
terms of production, it is becoming more rigid with regard to who participates and who does not.
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Primary located in developed countries, its importance has surged in developing countries over
the years. The industry has grown globally from 65.4 million to 84.1 million total new vehicles
sold over the period 2005 to 2012(OICA) and much of the production has shifted to developing
countries . Production is now interspersed throughout the globe with facilities on every continent
the automotive industry past and present is seen as a core industry, a unique economic anomaly
that has dominated the twentieth century. It has created changes in the way we live and work that
were unimaginable before, and today, its products still continue to transform our society and
everyday lives. For much of the developed world, and increasingly for the developing world, it is
Automobile industry is a symbol of technical marvel by human kind. Being one of the fastest
growing sectors in the world its dynamic growth phases are explained by Nature of competition,
product life cycle and consumer demand. Today, the global Automobile industry is concerned
with consumer demands for styling, safety, and Comfort; and with labor relations and
manufacturing efficiency. The industry is at the Crossroads with global mergers and relocation of
production centers to emerging Developing economies. Due to its deep forward and backward
linkages with several key segments of the economy, the automobile industry is having a strong
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multiplier effect on the growth of a country and hence is capable of being the driver of economic
growth. it plays a major catalytic role in developing transport sector in one hand and help
industrial sector on the Other to grow faster and thereby generate a significant employment
opportunities. Also as Many countries are opening the land border for trade and developing
international road Links, the contribution of automobile sector in increasing exports and imports
will be due to its deep forward and backward linkages with several key segments of the
Economy, the automobile industry is having a strong multiplier effect on the growth of a Country
and hence is capable of being the driver of economic growth..As automobile industry is
becoming more and more standardized, the Level of competition is increasing and production
base of most of auto giant companies are being shifted from the developed countries to
developing countries to take the Advantage of low cost of production. Thus, many developing
countries are making serious efforts to grab these opportunities which include many Asian
countries such as Thailand, China, India and Indonesia. The manufacture of motor vehicles
involves the manufacture and assembly of the final product from a number of metallic, plastic
and electrical components. A wide range of processes are involved including metal cutting,
pressing, polishing, grinding, welding, plating, & painting. The vehicle industry produces many
parts itself (e.g. by subsidiaries), while other parts are purchased. Engines are cast from
aluminum or iron, and further processed in engine plants. Vehicle bodies are generally formed
out of sheet steel, although there is a trend toward more plastic, reinforced fiberglass and
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2.2. State of the automotive industry
The automotive industry is a major industrial and economic force worldwide. It makes 60
million cars and trucks a year, and they are responsible for almost half the world's consumption
of oil. The industry employs 4 million people directly, and many more indirectly. Despite the
fact that many large companies have problems with overcapacity and low profitability, the
automotive industry remains very strong influence and importance. The industry also provides
well-paying jobs with good benefits, has heavy linkages with supplier industries (which gives it
an over sized role in economic development), and has a strong political influence. The power of
linkages is given by the following real but unspecified example of forecast economic impacts of
Revenue, State
1,032 20,585 53,498 81,399 99,242 106,714
Government
The industry is more than 100 years old. It started in Germany and France, and came of age in
the U.S. in the era of mass production. Vehicle volumes, efficiency, safety, features and choice
have grown steadily throughout the industry's history. It is so synonymous with 20th century
industrial development, and so intertwined with its twin marvels, mass production and mass
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consumption, that it has been called the "industry of industries."However, all is not well in the
automotive world. Worldwide, average margins have fallen from 20% in the 1920s to 5% now,
with many companies losing money. This poor profitability performance is reflected in the
industry's market capitalization: despite its huge revenues and employment, the automotive
industry accounts for only 1.6% of the stock market in Europe, and 0.6% in the U.S. There is a
big contrast between the industry's lackluster financial success and its over-sized social role,
share of employment and political influence. These facts mask a wide range of operational and
financial performance. Toyota, the most successful large auto company, has a market value 15
The overall performance of the industry can be traced to overcapacity and mature markets in
developed countries. In the U.S., Europe and Japan, which account for 80% of world sales,
growth has been stalling for many years. The natural response to slowing growth and increasing
productivity is to reduce capacity. However, existing plants are very painful to scrap: mass
production confers a strong cost advantage, which has traditionally encouraged very large and
expensive plants. The result is excess capacity worldwide. Even continuing consolidation in the
industry is not resulting in capacity reduction. Focusing on the U.S., the automakers have been
losing market share for three decades, and new plants by non U.S.based companies have
In Ethiopia industry in the modern sense of the term emerged as an economic entity only at the
turn of the 20th century. The establishment of a strong central government, expansion of cities
associated with the installation of railways and the strengthening of foreign relations increased
the demand for imported manufacturing commodities. This, in turn, encouraged the
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enterprises began to emerge in the 1920s. After a brief disruption in the Second World War
period, the manufacturing sector started to get momentum in the 1950s. During this period a
number of new industries which significantly contributed to the development of the national
economy were established. The 1950s are also marked by the start of a comprehensive plan to
stimulate and guide the country‟s industrial and economic development in general. Ethiopia has
seen three regimes over the last eight decades. Keeping with the political ideologies governing
the economic principles of the time, these successive regimes adopted different policies for the
development of industry in the country. The industrial policies have distinctive features when
looking at the guiding vision (policy), ownership structure, and market orientation. Broadly, they
can be characterized as the import substitution and private sector-led (from early 1950s to 1974,
the Imperial regime); the import substitution and state led (from 1974 to 1991, the Dergue
regime), and the export-orientated and private sectored (since 1991, the Ethiopian People‟s
industry specific policies are designed to increase the growth potential and international
competitiveness. In addition, Ethiopia‟s extensive minerals and energy resources ensure that
Ethiopia has relatively low utility charges for industrial users. Ethiopia‟s levels of educational
attainment are a source of competitive Need for Strengthening Automobile Industry in Ethiopia
undertaking initiatives across the education spectrum to produce employees who will better meet
the changing needs of future employers. Ethiopia‟s welcoming attitude to foreign investment,
today, Invest Ethiopia, the Government‟s inward investment agency, provides foreign firms with
provide information on location, joint venture partners, establishment costs and skills and
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2.4 Major trends of world automotive industry
The world's leading automobile manufacturers contrives into production facilities in emerging
markets in order to reduce production costs and therefore rise in profits. These emerging markets
include Latin America, China, Malaysia and other markets in Southeast Asia.
Now-a-days, there is trend of joint venture in global automotive industry. Most of the giant
automobile manufacturers are merging with each Others. The big three U.S. automakers (GM,
Ford and Chrysler) have merged with, and in some cases established commercial strategic
partnerships with other European and Japanese automobile manufacturers. The Chrysler
Daimler-Benz merger, were initiated by the European automaker in order to strengthen its
position in the U.S. market. Overall, there has been a trend by the world automakers to expand
Increasing global competition among the global manufacturers And positioning within foreign
markets has divided the world's automakers into three Groups, the first group being GM, Ford,
Toyota, Honda and Volkswagen, and the two Remaining group manufacturers attempting to
consolidate or merge with other lower Group automakers to compete with the first group
companies. World automotive industry, in its early stages of development, was concentrated
mainly in hands of developed countries like U.S., Japan etc. But as automobile industry Become
more and more standardized, the production base of most of auto-giant Companies were shifted
from the developed countries to developing countries. Standardization makes production more
profitable in developing countries due to low cost of labor. That‟s why countries like Thailand,
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China today are the main production base for many multinational automobile companies (Felix,
K.2017).
Today‟s global automotive industry is full of opportunities and risks which are everywhere in the
retail environment. Currently, the automotive industry has too much of everything too much
capacity, too many competitors and too much redundancy and overlap. The Industry is in the
2.5.1 Production
Today, the large car manufacturers have a production facility in the different Markets and from
each platform a car is produced for that market as well as for exports to other markets. Big
players in automobile industry do not have just one big factory which Exports its products to all
other countries. In addition, the products are not identical in each different market. It may have
the same technical platform, but the design and the options and features differ between countries.
They are different because the demands of customers differ between countries. For example, in
South America, incomes are lower than in Western Europe and customers need more affordable
cars. In the USA the customers want more space in the car, and that's an important factor for a
car to be successful there. On the contrary, small cars are quite popular in India. It is not possible
to be in the high volume market and to send the same cars to every market all over the World. So
car makers are researching what their customers want and changing the car for each market
otherwise they will lose customers. More and more CKD (completely Knocked down) cars are
being produced for some countries in smaller volumes. That is often the case if there are barriers
to exporting cars to particular countries, and they are only being sold in smaller volumes. With
larger markets, where sales of particular models are high, companies really need their own plant
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which has its own suppliers of parts. Due to sharp competition and changing customer demand,
product development Process advances have been more significant than changes in product
architecture. Product cycles continue to grow shorter as more companies adopt the simultaneous
Computer Aided Design (CAD) and Computer Aided Engineering (CAE) tools are being used to
replace physical prototypes and testing processes. Now, major players (in post M&A situation)
take greater responsibility for product design and allow production base To get shifted to
advantageous location for low cost. However, still due to lack of Standardization, number of tiers
at the supply chain is not reduced. Moreover, when Design is replicated with modification for
physical product development, several Domestic issues need to be taken into consideration.
These are mainly legal liability, and Regulatory procedures. Furthermore, there is a technological
move towards modules, i.e. Self-contained functional units with standardized interfaces that can
reshape the entire Supply chain in automobile industry as component designs will gradually get
shifted to Supplier companies. This is expected to reduce cost significantly and increase
efficiency. However, IMVP (International Motor Vehicle Programmed at MIT) found that cost
saving is still elusive. The absence of a clear cost advantage for modules, combined with the
factors could still accelerate the move towards modularity, including Automaker efforts to shift
investment risk to suppliers, the increasing use of information Associated with the flexibility of
the technology to constantly produce different models from same platform. Some of the major
technological issues which are important currently are increasing energy Efficiency, competency
- 18 -
of internal combustion engine (ICE), reducing the weight of Vehicles, and incorporating high-
The dynamics of international trade in automobile sector attracted attention of Economists and
policy makers to formulate trade strategy. International trade of an automobile has been
influenced both by liberalization as well as protectionism. In the 1970s and 1980s, the U.S. auto
industry faced its first major challenge from foreign competition as Japanese automakers
aggressively entered the American market. The decline of automobile sector in USA and rising
Japanese imports led to protectionism in USA through imposition of quota. This led to voluntary
export restraints (VER) from Japan anticipating further restriction. Japan continued with VER
even after the relaxation of quantitative restrictions by the USA government in 1985. In the post
oil crisis period, Japanese fuel efficient cars were high in demand in USA (Finance, &Report
(1982). Also, reluctance of the Big Three in the USA to produce smaller cars led to increase in
Import demand from Japan. Apart from this, the annual import limit had the perverse effect of
encouraging Japanese car companies to change the product mix of vehicles they shipped to the
USA, sending more upscale models, where the profits were greatest, and fewer smaller, cheaper
cars. In the early 1980s estimates say that the quota was transferring US$5 billion a year in
additional profits to Japanese automakers, who could sell their quota-limited cars at a premium.
Japanese car majors Toyota, Nissan, Honda, Etc jumped the quota barrier and invested in USA
for the domestic market also. The Protectionism in automobile market is also prevalent in Korea
Rep. Korean automobile Companies developed the sector through protection and currently
companies like Hyundai are heavily into export business. Similarly, Indian trade policy ensures
high barrier in importing vehicles to provide protection to domestic players who have started
exporting recently. In contrast to Japanese producers, companies from the USA were catering
- 19 -
mainly to domestic market. In the post quota period, when Japanese players reduced prices in US
Market, domestic players were unable to compete. Due to very high level of output and
efficiency, Japanese players achieved significant economies of scale which was Unattainable for
US automobile giants. Today, this has led to complete restructuring of the industry where even
US majors have started investing in other countries to capture the Global market share. Germany,
Japan and Canada emerged as major exporters of Automobiles to USA (Warf, 1990). There is a
strategic difference between Japanese and German players also. Studying the trade data, it is
clear that Germany has Emerged as a major vehicles exporting country in 2005 overshooting
Japan. Japanese Companies are more interested to relocate their plants (and also bring fresh
investments) to Asia or other developing countries and use that base as exporting platforms. As a
result, export from Japan gets reduced. Germany has given thrust to mid and big size high Priced
vehicles in its export basket in contrast to Japan which also gives importance to Low value small
cars. The major European countries also import a lot and the import growth is quite significant
during 2000-2005. All these countries also import Auto components significantly. Quite
interestingly, Asian players such as Japan and Korea rep import very less amount of components
The international trade in the automobile sector consists of trade in vehicles and components.
The sector consists of 82 six digit HS Codes. Components of automobile them into 7 broad
categories: rubber & glass components (Group I), iron & steel parts (Group II) , engine& parts
thereof (Group III), small parts such as Pulleys, gaskets, electrical fittings, etc. (Group IV), body
parts, bumpers, brakes, clutches and other safety components (Group V), seats, indicators,
bicycle and motor cycle Components (Group VI) and full vehicles (Group VII). Changing
pattern of export and Import of all these subgroups will be analyzed for each one of the selected
- 20 -
countries. Top 5 exporting markets and importing sources are identified for each sub-group trade
in automotive Sector takes place either for market seeking activities or for using destination
country as offshore export platform. Trade in components is very much dependent on status of
Domestic component sector, protection and government regulation in component trading, Level
Thailand‟s automobile Sector is truly export oriented. It has developed domestic component
sector but still several critical components get imported. India‟s export orientation was started to
tackle the domestic overcapacity problem. Export orientation has come out as a second best
Strategy for many players and as a result much focus has not been given to make Component
Today, China is more into component trading than trading of vehicles, On the Other hand
economies of scale are not being achieved through manufacturing due to smaller size of the
market. Though Indonesia exports some vehicles, majority of companies play with „models‟ and
„makes‟ for the domestic market only. Component sector got developed through government
protection. However, technology absorption in the component sector is not sufficient and as a
result critical components are still imported (Yorgos, and Michell, 2007).
- 21 -
2.6 Automotive sector in Africa
Africa‟s automotive market is relatively small. In 2014, there were just over 42.5 million
registered vehicles in use in Africa continent of approximately one billion people. As a result, the
motorization rate on the continent is only 44 vehicles per 1, 000inhabitants. This is far below the
global average of 180 vehicles per 1 ,000 inhabitants, and lower than other developing regions
such as Latin America (176) and Developing Asia, Oceania and the Middle East . In 2015,
approximately 1.55 million new vehicles were soldering registered across Africa. South Africa,
Egypt, Algeria and Morocco all countries with established and rapidly developing automotive
industries together accounted for more than 80%of total new vehicle sales in 2015. Based on
recent sales trends, some sources estimate that Africa‟s passenger vehicle sales could reach up to
10 million units per annul within the next 15 years. Between 2005 and 2015, registrations and
sales of new vehicles (passenger and commercial combined) increased by a compound annual
growth rate CAGR of 3.6% on the continent. While coming from a low base and although
slightly higher than the global average of 3.5%, total sales growth in Africa was significantly
slower than other emerging regions such as Asia and the Middle East (8.9%), and Latin America
(4.2%).Both the lower motorization rate to date and new vehicle sales and registrations reflect
the still relatively low purchasing power of African consumers relative to their emerging market
peers. More importantly, the sizable latent potential of the continent‟s automotive market in the
long term. Due to limited disposable income and the high cost of new vehicles, second-hand
vehicles dominate the continent‟s automotive retail sector. These are mainly imported. Based on
in market research, Deloitte estimates that in the three African countries under review (Ethiopia,
Kenya, and Nigeria) at least 8 out of10 imported vehicles are used vehicles. This is a common
trend across the region given that Africa imports four times more automotive products than it
exports, with automotive imports worth US$48 billion in 2014 and exports worth only US$11
- 22 -
billion that year. Key sources of used vehicles are the United States (US), Europe and Japan. The
Middle East for example serves as a notable transit route for vehicles into East Africa. Imports of
vehicles grew rapidly from 2003 onwards, coinciding with GDP per capita growth and a growing
South Africa dominates automotive trade on the continent, accounting for three-quarters of
Africa‟s automotive exports and15% of imports in 2014.6 South Africa, Egypt, Morocco, and
Algeria have sizable automotive assembly and manufacturing sectors. Despite these relatively
well established automotive hubs in South Africa and countries in North Africa, fewer than 900
000 vehicles were produced on the continent accounting for just over 0.9% of global production
in 2015.The rest of the continent is mainly are dominated automotive market. A common trend
thus is that a small share of new vehicles competes against a strong influx of second-hand
vehicle imports. Even though domestic vehicle production and assembly may have substantial
multiplier effects for African economies, and could act as a catalyst for industrialization and
economic diversification, this is at a lesser stage of development. As a result the sector has been
export revenue sources and ultimately industrialize their economies .It is observed that the
- 23 -
present status of automobile industry in Ethiopia, the potential of the industry and the demand of
automobile vehicles including their spare parts. In Ethiopia many imported vehicles from
different parts of the world are in daily use. Maximum numbers of vehicles are of Toyota. Also
the spare parts are imported spending lot of money and time. The automotive assembly industries
in Ethiopia at present day‟s starts to emerge, it is therefore the assembled vehicles in Ethiopia are
The three countries under review each have an existing automotive industry, although at various
stages of development, and Are all interested in further expanding the sector. Only Nigeria has a
concrete automotive industry policy in place to provide targeted support to the industry. Kenya
and Ethiopia currently rely on their respective industrial policies, with Kenya focusing on
improving the country‟s operating environment, and Ethiopia on building industrial capacity
through the country‟s state-owned enterprises and by promoting science and technology
urban population)
- 24 -
Table 2.3: Auto indicator source
Borrowed from a financial institution (% age 15+) 7.4 14.9 5.3 2014
Ethiopia has been among Africa‟s most impressive growth performers over the past decade
averaging 10.9% annual growth between 2004 and 2014. With a GDP of US$63 billion in 2015
it is the ninth largest economy in Africa and the third largest in Eastern Africa. After Nigeria, the
country is also home to the continent‟s second largest population of 90 million people in 2015
- 25 -
economic diversification by promoting agriculture and industrial development, and the creation
development. Although seen as one of the world‟s poorest countries, with a per capital income of
Eastern Africa especially in the manufacturing sector. Given the current limited disposable
particularly commercial vehicles. Commercial vehicles were Ethiopia‟s second most valuable
import overall in 2014, worth us$859 million. Commercial vehicles were also Ethiopia‟s highest
earning automotive export in 2014. The Ethiopian government is doing everything to transform
the country‟s economy from its current dependency on rain fed agriculture. Although the
economy that is based on manufacturing and modern heavy industries like mining. While the
mining Industry is still for most part in the preliminary stage of development the manufacturing
sector is off to a good start. One among the few home grown manufacturing sectors is the
huge Bishoftu Automotive Industry on the outskirts of Addis Ababa. The statistics indicated that
in 2015, only 160, 000 vehicles were in use in Ethiopia to imply a car per 500 inhabitants making
the country to have the lowest motorization rate globally. The commercial vehicles are estimated
to be 60, 000 while 95, 000 were passenger vehicles. The ministry of transport in Ethiopia
indicates that commercial vehicles are 16% while passenger vehicles take the lion‟s share of
84%. It‟s estimated that annually, 18,000 vehicles are brought into Ethiopia‟s market most of
which are second-hand vehicles. Passenger vehicle sales are mainly driven by government while
construction and agribusiness industries control the sale of new commercial vehicles. The
exportation and importation of used commercial vehicles are dominant in Ethiopia and in 2015
the imports were valued at $875 million making it the most valued overall import. The country
- 26 -
mainly exports vehicles from the Gulf States via the Port of Djibouti since Ethiopia is a
Industry (BAI) contributed much revenue. The company specializes in overhauling, assembling,
localization and upgrading of buses, trucks, pickups, SUVs and military equipment. The
Ethiopian military runs it. The government lowers taxation for commercial vehicles instead of
personal cars, but the diplomats and foreign investors can import vehicles without incurring the
import duties. The engine size mainly dictates the affordability of a vehicle and with the taxation
policy of Ethiopia, the cost of an imported vehicle is likely to be three times the retail price of the
vehicle outside of the country. Since there‟s limited supply of vehicles and high import duties,
Ethiopia, there‟s a large market for second-hand vehicles in Ethiopia which is estimated to be
85% of vehicles. Toyotas dominate the market as they occupy 90% of the second-hand vehicles
sold in Ethiopia. It‟s estimated that between 5000 and 7000-second hand Toyota and 2000 new
Toyota are imported annually making Toyota in a position to control 65% of the total market.
It is observed that the present status of automobile industry in Ethiopia, the potential of the
industry and the demand of automobile vehicles including their spare parts. In Ethiopia many
imported vehicles from different parts of the world are in daily use. Maximum numbers of
vehicles are of Toyota. Also the spare parts are imported spending lot of money and time. The
automotive assembly industries in Ethiopia at present day‟s starts to emerge, it is therefore the
In addition to the high tax rates that vehicles attract, the government‟s method of determining the
value of imported vehicles further increases the retail price. The base value of the vehicle is
- 27 -
based on the government‟s own “blue book” which does not tend to be in line with market prices
globally. Furthermore, when varying prices for the same vehicle occur, the highest base value is
applied. The following examples illustrate the discrepancies between international market prices
and the retail prices in Ethiopia: However, Ethiopia‟s strong government support for
industrialization and the development of auxiliary industries coupled with a large cost
competitive labor pool, and sizable investments in infrastructure (both physical and economic)
could position the country favorably for automotive manufacturing in the long term to service
both the regional and domestic market with price competitive vehicles. To achieve this, clear
definitions of local content need to be developed. The country‟s high tax rate on vehicles reduces
the affordability of vehicles, especially given the low income of the population, and restrains the
vehicle retail market. To address this, industry stakeholders should support the establishment of
vehicle financing solutions, in order to encourage wider vehicle ownership. Taxes should be
revised to also take the age of vehicles into account in order to provide incentives for locally-
produced vehicles. To overcome the limited supply of foreign exchange available to automotive
importers and producers policy interventions and cooperation between government and private
sector players would be required. Ethiopia‟s lack of automotive policy presents a unique
opportunity to develop such a policy, with inputs from both the private and public sectors, to
ensure that a comprehensive, efficient policy aligned to the country‟s overall vision to
industrialize is implemented over the medium term. Similarly to the case of China in the early
1980s, Ethiopia‟s current small market size and motorization rate should not be seen as a
deterrent for market entry, but rather as a unique long-term opportunity for first movers in the
- 28 -
Table 2.5: List of vehicle assembly companies
Ethiopian investment commission annual report states that there is a need for investing and
strength assembly plant operations the local and foreign investors are applying to the commotion
to invest assembly plant and more than 100 investors got investment license up on their request
but the above table shows only seven organization are in operation of assembly of vehicle this
indicated as high demand of investment in vehicle assembly plant but the issues that pull back
2017).
introduced in Ethiopia truck model 621 and 634 which gradually Gained popularity in the
country. Apparently, encouraged by the promising result from the venture, FIAT decided to open
an assembly plant in Ethiopia in collaboration with the Ethiopian Government. Thus, AMCE was
- 29 -
established in 1970, at the same place it is occupying now, Bole sub-city, Woreda 12 House No.
306 on a total area of 132,392 square meter land and currently employ about 150 workers.
The Automotive Manufacturing Co. of Ethiopia (AMCE) is today the biggest company in the
country in the Industrial vehicles‟ segment. AMCE is a share-holder company owned 70% by
IVECO, the international company of the FIAT group and 30% by the local Ministry of Industry
and Trade. Since its foundation, AMCE has concentrated its business in the transport sector. At
the end of the 70‟s AMCE was the sole company in Ethiopia to assemble heavy trucks. With its
huge premises the company was monopolist in the truck business and was also the leader in the
bus segment. After the opening of the market (customs duties on imported vehicles have been
dramatically reduced) AMCE is still keeping the leadership in the heavy trucks segment. Even
today where the competition is very high, IVECO products are still the most required. In
Ethiopian Market IVECO product is appreciated that are very reliable and are keeping a very
good value even after many years; this is also due the huge running park, of around 15.000 units
between trucks and buses and availability of spare parts all over the country”.
A part importation of vehicles, AMCE also provides genuine spare parts for all IVECO model
vehicles for service and maintenance according to its customers need and in order to give full
service and to avoid worries for its customers even after sales, and to let its customers business
- 30 -
goes smoothly without any shortage of parts during they have problems to their vehicles at any
time. And to avoid problem of getting genuine parts of IVECO outside Addis Ababa, AMCE has
spare part dealers throughout the country, so, the customers are able to buy from those of IVECO
Parts dealers. AMCE also strongly recommend for its customers not to forget using IVECO
original/genuine spare parts for long lasting and strong stability of their vehicles.
Workshop:
AMCE workshop is always ready to serve its customers with its qualified and
The workshop is stand on 3,000 square meters and is equipped with modern machines
Service, Maintenance, engine overhaul for all types of heavy duty trucks
What the customer has to pay for the service/maintenance is a lot fair and much
The workshop is open for all IVECO vehicle owners who come on time of their warranty time
(AMCE, 2018)
There‟s need for the state to establish vehicle financing solutions and a new system of taxation
since the high taxation on vehicles based on engine size reduce the affordability. Currently,
Ethiopia produces 8000 vehicles annually for the home market. The government has strategic on
long-term goals of expanding the auto industry in Addis Ababa and Mekelle where China Lifan
Auto Group assembles the vehicle kits. Ethiopia wants to follow the trend of other countries in
Africa such as South Africa and Morocco which manufacture over 600, 000 and 200, 000
vehicles annually. Countries such as Kenya, Egypt, and Sudan also assemble vehicles. The
- 31 -
growth of Ethiopia‟s economy has been witnessed in Africa with recent dam construction
enabling the nation to supply electricity to its citizens. Ethiopia‟s vision is to be the leading
manufacturing hub in Africa, and with the steps, they are taking, they are likely to achieve their
It is observed that the present status of automobile industry in Ethiopia, the potential of the
industry and the demand of automobile vehicles including their spare parts. In Ethiopia many
imported vehicles from different parts of the world are in daily use. Maximum numbers of
vehicles are of Toyota. Also the spare parts are imported spending lot of money and time. The
main source of transport is for all the classes of people are taxis and buses in the country. There
are some private taxi's playing in almost all the cities like vans, three wheelers Bajaj and TVS
from India which is the cheapest mode of transport for the poor people. Buses, mini buses are
operated linking inter states or regions by fleet of transport agencies to transport the public. Also
many trucks and Lorries are being used to transport the goods of different categories. There is no
train facility in the country and no railway links to connect the cities of the country. People are
using flight connections of airlines to travel long distance in order to meet emergency needs.
Ethiopia land consist of high lands most of the part hills and uneven surface, where the Ethiopian
Buses, trucks with trolleys and minibuses including earth moving equipment, Luxury cars and
light duty vehicles all are imported as used vehicles from other countries. Now trend is picking
up to run motor bikes on the roads of all most all cities by some citizens. All these motor bikes
are getting imported from India (TVS& Bajaj) & China (Lifan). The export and import agencies,
Djibouti port authorities and Government duty all are added to the value of the products and the
traders demand more profits from all this products, all these are taxed to the customers and the
customers have to pay more money for the product (Aaron M., 2016).
- 32 -
Figure 2.3. Intercity bus assembled by Bishoftu Automotive Industry
economically damaging. There are explicit and quantifiable monetary costs to private
households as well as to the government. To start with private costs, the excessive import taxes
do not only inflate prices of vehicles but also their spare parts. Needless to say that old cars
require frequent maintenance, which has often eaten into the meager household budget. In
another piece entitle Ethiopia‟s low wage curse, , Ethiopian households have tended to for non-
genuine spare parts because of their lower price, which could partly explain high fatalities on the
road, or even more frequent maintenance. Now about costs to the government and the wider
economy. The damaging economic impacts of old fleets on the wider economy cannot be
overemphasized. Let‟s start with cost of spare parts which would need to be imported and in
larger quantities than would be the case if the fleets have had lower average age. The extent to
which spare part imports has been a drain on the country‟s scarce foreign exchange is yet to be
studied. A comparative analysis with other countries would inevitably reveal some interesting
results. Importantly, fuel economy has been the main driving force shaping public policy on car
- 33 -
ownership in the rest of the world. Fuel economy is a double-edged sword; it serves both
economic and environmental goals. In order to illustrate this, relevant data was brought together
from various sources and compiled in the table below. The upper part of the table compares two
Toyota Corolla models – one from 1986 and the other 2003 model, a relatively recent model by
Ethiopian standard. The data was obtained from Global Fuel Economy Initiative Study in
Ethiopia 2012.The 1986 and 2003 models would run with 12.2 and 15.3 km/liter respectively
that is a 3.1 km difference per liter! Similarly, there is a 39.1 grams CO2 emissions difference
per km between the old and the new models. The 2012 fuel economy report on Ethiopia stated
average annual mileage of passenger cars was 24,000, trucks and buses were 50,000km each. If
we apply the current US$0.67 (birr 18.77) per liter fuel cost in Ethiopia, then we establish there
would be US$267.2 saving by changing to the relatively recent model (Ayel,G. 2018)..
The Deloitte Africa Automotive Insights report cited earlier stated that there were about 600,000
vehicles in Ethiopia and the bulk of them (85%) were classified as old fleets. If we gross up the
figures fuel economy data reported in the upper part of the table, then we get that total additional
- 34 -
fuel cost saving would be about US$206 million and CO2 emission would be reduced by about
722,323 tons per year, about 7% of Ethiopia‟s total CO2 emission. The annual economic cost
reported in the table above is likely to be a small fraction of total costs, which should include
additional costs on spare part imports. Similarly, the CO2 emission is likely to be the minimum
A. Import duty
Successive regimes in Ethiopia have made it their duty to deprive Ethiopians from owning a car.
This was accomplished by imposing an exorbitantly high car import duties and related car
ownership taxes. The combined effects of high import taxes and the unfavorable structure of
vehicle import market has been that cost of vehicles has always been prohibitively high in
Ethiopia has the lowest motorization rate globally, with only two cars per 1 000 inhabitants in
2014.12 OICA estimates that in 2014 there were 150 000 vehicles in use in Ethiopia, of which 90
000were passenger vehicles and 60 000 were commercial vehicles. Between 2005 and 2014,
total vehicles in use grew at CAGR of 2%. The World Health Organization, for example,
estimates that there were 377, 943 registered vehicles in Ethiopia in 2010.
Ethiopia‟s Ministry of Transport reports that there are 587, 400 vehicles on the road, with an
annual growth rate of approximately 6%. Approximately 84% of the market is passenger
vehicles while commercial vehicles make up 16%.Second-hand vehicles dominate the market.
Approximately 85%of vehicles are second-hand imports, of which almost 90% are Toyota‟s.
These vehicles are imported primarily from the Gulf States, through the Port of Djibouti. The
vast majority of Ethiopia‟s vehicles are concentrated in Addis Ababa, while the number of
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vehicles in rural areas remains low. Points of entry to Ethiopia are well controlled, with the
exception of the area around the border with Somalia. The average age of Ethiopia‟s fleet is 15-
20 years. Vehicles are considered to be second-hand ten years after their production date,
compared to the global norm of four years after production (Thomas S, Karthi P., 2016).
There is almost no publicly available reliable data on vehicle Sales in Ethiopia. It is however
estimated that 18,000 vehicles are brought into Ethiopia each year. The majority of these are
second-hand vehicles. Each year, 2,000 new Toyota's and between 5000 and 7000 used Toyota s
are imported. In total, Toyota controls approximately 65% of the total market (new and second-
hand) due to its reputation as being reliable and inexpensive to maintain. The main drivers of
new commercial vehicle sales are construction, agribusiness and retail while passenger vehicle
sales are driven by government (including diplomatic corps) purchases. Due to low disposable
income, the absence of vehicle finance facilities and the ban of vehicle leasing schemes, personal
vehicles remain out of reach for the majority of the population. Limited availability of foreign
exchange to purchase imports also restrains access to vehicles. Vehicle affordability is further
locked up by prohibitively high vehicle taxes of sometimes more than 220% depending on
engine size. As taxes in Ethiopia are cumulative, excise tax is calculated on the customs duty,
surtax is charged on top of the excise tax, and customs duty and final VAT is calculated once the
surtax, excise tax and customs duty have been added. Imported vehicles may cost as much as
Three times the retail price of the vehicle outside of the country. Commercial vehicles, such as
pick-ups, vans and trucks have a lower tax rate than vehicles for personal use. Relative
disincentives exist is via personal vehicles compared to commercial vehicles. Diplomats and
foreign investors are allowed to import vehicles duty-free. The supply-depressing character of
foreign exchange shortages contributes to imbalances in the market and drives up the market
- 36 -
price of vehicles, thus also having a negative impact on the affordability of vehicles in the
- 37 -
2.6.2.5 Production and Assembly
From 1998, the Ethiopian Investment Commission reports that 73 domestic vehicle assembly
investment project and 31 foreign vehicle investment projects have been licensed, but only a few
are operational. The tax system in Ethiopia is dependent on engine size and not age or origin, and
as a result, it‟s cheaper to buy or import a vehicle with smaller engine compared to local
assembling. Some components of vehicles such as tyres are sourced from the country by some
assemblers, but the country doesn‟t have the defined local content requirement. The
government‟s provision of cost-competitive labor pool and investment may place the automotive
sector in a better position for development. There‟s need for the state to establish vehicle
financing solutions and a new system of taxation since the high taxations on vehicles based on
engine size reduce the affordability. Currently, Ethiopia produces 8000 vehicles annually for the
home market. The government has strategic on long-term goals of expanding the auto industry in
Addis Ababa and Mekelle where China Lifan Auto Group assembles the vehicle kits. Currently,
the state is working on the construction of an electric railway which will link the nation to
Djibouti, and they have partnered with Chinese firms to ensure the projects are finally achieved.
The car assemblers in Ethiopia are faced with many challenges since there‟s depreciation in
value of cars and finished imports. They also face competition from used imports like Toyota.
While actual production numbers are not available, a number of assemblers indicated that plants
were not operating at full capacity due to the current limited market size and inadequate access
to:
1) Foreign exchange to cover imports of Semi Knocked-Down (SKD) kits. During the past
decade, a number of leading international automotive companies have carried out market scoping
exercises to assess the viability of Ethiopia as an assembly hub. However, due to the limited
market size, large-scale investments by these automotive firms have not yet materialized.
- 38 -
2) While SKD production currently takes place, companies such as BAI are looking to move to
Complete Knocked-Down (CKD) kits and possibly the full production of vehicles within the
next five years. BAI dominates the local production market, with a number of private sector
current environment. BAI also benefits greatly from local government patronage of its products,
especially buses used for public transport schemes in Addis Ababa. Although a number of
assemblers source some components such as tyres locally, Ethiopia has no defined local content
requirement. A number of assemblers indicated that they are instructed that local content should
be approximately 30% in order to qualify for the 30% tax incentive associated with all local
Manufacturing, but that no written agreement exists between assemblers and the state.
Due to Ethiopia‟s tax system, which subjects vehicles to tax depending on their engine size
rather than age or origin, it is often cheaper to import a second-hand vehicle with a smaller
Engine size than it is to assemble a vehicle locally, despite import taxes on these vehicles.
Ethiopia is subject to foreign exchange controls and exporters are given preferential access to
foreign exchange. Insufficient availability of foreign exchange causes inefficiencies and planning
Challenges for importers of SKD kits, Fully Built-Up (FBU) units and parts (for assembly or
repair) and inhibits the growth of assembly and retail, market inhibits the growth of assembly
The Ethiopian government has been targeting both public and private investment into value-
added manufacturing, in an effort to diversify the economy away from agriculture. Ethiopia is
making a substantial effort to link into global value chains by targeting export-orientated
manufacturing and has attracted a number of investors into the garment and textile industry. This
- 39 -
is seen to support the government‟s goal of becoming a middle income country by 2025.The
manufacturing sector has been selected as a high priority sector by government. As a result,
Ethiopia‟s economic policy, the second Growth and Transformation Plan (GTP II), aims to
support and grow the manufacturing contribution to GDP from 4% in2014 to 8% by 2020. This
including tax incentives, to foreign investor. For example, new investors in the manufacturing
sector, including automotive, are exempt from paying income tax for a period of five years if
more than 50% of their products or services are exported, or if more than 75% of their product is
supplied to an exporter as a production input. Investors who only supply the local market or
export less than 50% of their product are tax exempt for two years. Income tax exemptions
ranging from one to ten years are applicable to investors in a range of prioritized industries and
manufacturing. In fact, a dedicated automotive manufacturing policy is not in place. Given that
the current tax regime governing vehicle excise and surtax does not distinguish between
imported or locally assembled vehicles, levying of these taxes does not provide any incentive for
mechanism for the government. While most vehicle imports attract high tax rates, the Ethiopian
Government does not levy any export duty on vehicles. Duty-free exports and preferential
market access due to its membership of the Common Market for Eastern and Southern Africa
(COMESA) and duty-free access to the US under the African Growth and Opportunity Act
(AGOA), provide Ethiopia with access to a much larger market than its Domestic market. The
experiences of automotive hubs in emerging markets including Mexico, South Africa and
Thailand, indicate that Preferential or duty-free access to large export markets is beneficial for
- 40 -
and industry specific policies are designed to increase the growth potential and international
competitiveness. In addition, Ethiopia‟s extensive minerals and energy resources ensure that
Ethiopia has relatively low utility charges for industrial users. Ethiopia‟s levels of educational
attainment are a source of competitive advantage and underpin the skills base of the workforce.
The Ethiopian Government is undertaking initiatives across the education spectrum to produce
employees who will better meet the changing needs of future employers. Ethiopia‟s welcoming
attitude to foreign investment, today, Invest Ethiopia, the Government‟s inward investment
agency, provides foreign firms with information in regard to potential investment opportunities
in Ethiopia. Invest Ethiopia can provide information on location, joint venture partners,
establishment costs and skills and taxation information. All of the motor vehicles operating in the
country, except relatively a few assembled in Bishoftu Automotive industry, Belayab, Lifan,
Abay, are imported from other developed countries like Japan, Germany, middle East and China.
- 41 -
Table 2.8: comparative analysis of Vitiz and land Cruiser
Dubai) Germany)
applicable taxes
Despite being home to the continent‟s second largest population, the overall automotive market
size remains small in the short to medium term for current and prospective assemblers and
Producers. However, Ethiopia‟s strong government support for industrialization and the
development of auxiliary industries coupled with a large cost competitive labor pool, and sizable
investments in infrastructure (both physical and economic) could position the country favorably
for automotive manufacturing in the long term to service both the regional and domestic market
with price competitive vehicles. To achieve this, clear definitions of local content need to be
developed. The country‟s high tax rates on vehicles reduce the affordability of vehicles,
- 42 -
especially given the low income of the population, and restrain the vehicle retail market. To
address this, industry stakeholders should support the establishment of vehicle financing
solutions, in order to encourage wider vehicle ownership. Taxes should be revised to also take
the age of vehicles into account in order to provide incentives for locally produced vehicles. To
overcome the limited supply of foreign exchange available to automotive importers and
producer‟s policy interventions and cooperation between government and private sector players
would be required. Ethiopia‟s lack of automotive policy presents a unique opportunity to develop
such a policy, with inputs from both the private and public sectors, to ensure that a
implemented over the medium term. Similarly to the case of China in the early 1980s, Ethiopia‟s
current small market size and motorization rate should not be seen as a deterrent for market
entry, but rather as a unique long-term opportunity for first movers in the automotive sector.
Ethiopian automotive import market is open for all domestic investors interested in the business
and plan to penetrate the automotive market. Regarding the type of vehicles that can be imported
to the country, there is only one government regulation which prohibits dealers from selling to
government organization before being tested for five years in Ethiopian market. Otherwise the
private sector or the majority of the public is free to choose any brand they want to purchase.
Using the advantage of the free entry, the Korean cars are aggressively in passenger car market
and Chinese are aggressively marketing their trucks of heavy duty class. The government is also
under final stage of completing the study to introduce a regulation to ban importation of used
- 43 -
cars which are older than five years from the recent year of production. This measure will help
the country in reducing foreign currency expenditure for spare parts and also to protect the
environment from pollution. Currently we are in an era where the world is thinking about
electric, hydrogen or hybrid cars in order to reduces the dependency on oil and also to reduce
environment pollution. Ethiopia should follow the move at least by preventing from being
dumping ground for older cars of Europe and Middle Eastern countries. Some positive
development is observed by the recently established car assembly plant, which produces Eco-
Friendly cars. The motor Vehicle certification system is easy as long as one fulfills the regulation
of Transport Authority. The inspection system is not developed and is below the standard
compared to international practices. This is one of the major reasons why the rate of traffic
accident in Ethiopia is high by the world standard. Nowadays the inspection system is getting
tougher and it is being sub contracted to dealer companies. However, the inspections system
needs to be properly followed and controlled routinely. Otherwise since the level of public
awareness is low, deployment of motor vehicle which not road are worthy will cause damage to
B) Price of fuel
The domestic sales of new motor vehicles are showing an increasing trend recently due to the
effect of fuel price. Since the new motor vehicles are better in fuel efficiency, the public
test/habit is shifting towards purchase of new cars than used cars especially in passenger vehicles
class.
Previously most of the passenger cars were second hand cars which served for more than 10
years. Since recently brand new, latest version and luxury class cars are being seen. Even a kind
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competition on style and comfort of car that one is driving is observed in the upper & affluent
Ethiopian customer did not have a profound test and preference attributed to the customs policy
of the country and lack of choice. As a result the market was supply driven and influenced by
broker/mouth advertisement. In recent years end users are getting access and information and the
market is changing to be demand driven. End users are having their own criteria of selection
from price to style and/or dependability. In older days only the resale value and availability of
The following are among other factors affecting locally assembled vehicles in Ethiopia.
(Mebrhatu, M. 2018).
The manufacture of motor vehicles involves the manufacture and assembly of the final product
from a number of metallic, plastic and electrical components. A wide range of processes are
involved including metal cutting, pressing, polishing, grinding, welding, plating, & painting. The
vehicle industry produces many parts itself (e.g. by subsidiaries), while other parts are
purchased. Engines are cast from aluminum or iron, and further processed in engine plants.
Vehicle bodies are generally formed out of sheet steel, although there is a trend toward more
- 45 -
plastic, reinforced fiberglass and aluminum parts in vehicle bodies. There are close linkages with
other metal industry sectors, particularly Foundries, Metal Surface Engineering, and Metal
Fabrication, as well as to the manufacture of plastic products, glass and textiles. It is common for
the Press Shop and Metal Surface Engineering (Plating Shop) to be located on the same site and
in these cases, it will be necessary to refer also to the relevant guidelines. The vehicle
manufacturing process is shown in the manufacture of motor vehicles involves the manufacture
and assembly of the final product from a number of metallic, plastic and electrical components.
A wide range of processes are involved including metal cutting, pressing, polishing, grinding,
welding, plating, & painting. The vehicle industry produces many parts itself (e.g. by
subsidiaries), while other parts are purchased. Engines are cast from aluminum or iron, and
further processed in engine plants. Vehicle bodies are generally formed out of sheet steel,
although there is a trend toward more plastic, reinforced fiberglass and aluminum parts in vehicle
bodies. There are close linkages with other metal industry sectors, particularly Foundries, Metal
Surface Engineering, and Metal Fabrication, as well as to the manufacture of plastic products,
glass and textiles. It is common for the Press Shop and Metal Surface Engineering (Plating Shop)
to be located on the same site and in these cases, it will be necessary to refer also to the relevant
parts are assembled into approximately 100 major vehicle components. Assembly plants are
highly automated computer controlled assembly line operations. The unpainted vehicle body
(also known as the “body-in-white”) is assembled from formed body panels joined by welding,
glue and riveting. The vehicle passes by conveyor to the paint shop for: Pr-treatment (decreasing
and anti-corrosion inhibitor); Priming; Seam sealing and under body preparation; Application of
filler and finishing paint coats; Polishing, inspection and rectification; under sealing and wax
- 46 -
injection. The Hard Trim is the fitting of items such as instrument panels, steering columns and
body glass. The Soft Trim is the fitting of seats, door pads and upholstery. The vehicle is then
fitted with the petrol tank, exhaust, and bumpers. At the same time, the engine is assembled. The
engine and tyres are then fitted and the vehicle is subjected to a rigorous inspection (EBRD Sub
1. Engine shop- where the engine block casting is made according to dimensions and other
engine parts are assembled. Engine and transmission production requires components that are
resistant to oil and lubricants. Installation solutions have to be cost-effective and flexible because
each system presents a new challenge. It is important that the components are small because
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Figure 2.5 Engines assemble line Source :(Yash Desai,T. 2014)
2. Trans axle shop - Complete machining of gear blanks, shafts and assemble of gear box is
done here. The gear box is send to engine shop where it is fitted with engine and the unit is
3. Press shop- the sheet metal operation is carried out where the different panels of the car are
made such as doors, pillars, hood, roof etc. automation in the automotive industry more apparent
than in the press shop. All manufacturing steps are fully automatic and the components have to
be resistant to vibration and shock ,safety modules provide the highest reliability and help to
ensure machine availability to reduce costly downtime, in the control panel a combination power
supplies offer the longest operating life and pee-failure warning, these coupled with 24 V DC
power distribution and protection systems allow failing components to be detected and changed
4. Weld shop- Welding of these panels is done and the body made is called body in white
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5. Paint shop- as the name suggests, the painting of complete body is done, and painted body is
6. TCF shop- Trim Chassis Final shop where the engine is assembled with the body along with
other parts such as wheels, wind shield, seats dashboard, ac, etc.
Testing - finally tests are carried out such as shower test, DLT test, drive test etc
The interior of vehicle may not strike you as the most essential aspect of your vehicle, but it is
the area of your vehicle you will spend the most time with (hopeful. Naturally, all the time you
spend driving is spent inside your car or truck. Therefore, it would be wise to keep the interior of
your automobile in a good state of repair. Doing so will only serve to make your driving
experience easier and more pleasant. There are many parts and accessories that play a role in the
upkeep of your car or truck‟s interior. These range from the aesthetic to the practical to the
essential and each serves a specific function as well as helps the inside of your vehicle look clean
and clutter free. New dash caps in can replace faded or cracked ones and give the interior a better
look. New seat heating pads can make your drive more comfortable. Parts like cup holders and
glove box liners serve practical functions, giving you a place to put your coffee and spare
change, and your registration and embarrassing CD's, respectively. Hazard light switch is
essential in the event of an emergency, and instrument panel light bulbs keep you aware of the
important information displayed by your vehicle. These are only a small sample of the interior
auto parts and accessories that you will find in the inside of your car or truck. Others include
headliners, floor mats, steering wheel, horns, switches, interior rear view mirrors, and parts for
your doors, windows, seats, console, and much more (Interior Parts & Accessories,2018)
Bishoftu Automotive Industry annual sale for four years is shown in the following table:
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Table 2.9: Annual sales Bishoftu Automotive Industry (2005-2008)
in ETB
1 2005/2013 2,055,155,859.86
2 2006/2014 2,121,929,308.92
3 2007/2015 2,155,875,474.48
4 2008/2016 2,255,700,187.38
5 2009/2017 1,844,010,222.43
Source: BAI
Bishoftu automotive industry assembles light vehicles, heavy duty commercial trucks and buses.
So in order to compete in global market level and satisfy local customers it must manufacture
high quality spare parts that are ready for assembly and high performance. Moreover; the
company assembles highly demanded city buses and commercial pickup vehicles. However
assembling long buses would have taken the company to higher performance and achievement,
furthermore conducting concrete study in manufacturing spare parts and assembling long bus
like selam bus, Ethio bus and overall vehicles is necessary to do so. Therefore, in order to satisfy
the customers demand and enhance the growth of the automotive vehicle assembly industry in
Ethiopia the company must necessarily fill the gaps there should be provide to customers in
prudent Quality, fair price, after sales service and spare availability.
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CHAPTER THREE
METHODOLOGY
3.1 Introduction
Methodology is critical prefer to research design, data gathering technique and instrument, study
population, sampling and sampling technique to get appropriated justification related with each
formulation.
The research uses descriptive research design in carrying out the study. Since the study is
comparative and directional the design is preferred because it will be concerned with answering
questions like who, how, what, which, when and how much. The first part of the study consisted
of a series of well-structured questionnaire for Bishoftu automotive industry workers and the
second part consisted of field observation in Bishoftu automotive industry. Both qualitative and
3.1.1.1 Methodology
The research used both qualitative and quantitative methods and combination of primary
and secondary sources of data. The qualitative data supports the quantitative data analysis to
The target populations of this study are 160 employees of Bishoftu automotive industry and 40
Random Sampling method was applied to determine the sample size of the study from the target
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respondents were selected. The sample selected is in line with Roscoe‟s rule of thumb which
indicates that a minimum sample size of 30 respondents is appropriate for any business research
(Serkaran, 2000).
First hand information that was obtained from the field using primary data sources like
managers, operational mangers and marketing and sells department. Primary source is useful
Secondary sources are defined as analyses and interpretation of primary research. Secondary data
obtained from literature regarding automotive vehicle reports and the remaining data were
from the companies‟ manuals, reports and some management documents which were
Data collection methods were focused on the followings basic techniques. Data were collected
using questionnaire. This secondary data sources could be internal and external data sources of
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3.3.1 Questionnaires
Questioner is the main research instrument that is used to gather primary data from the individual
Documents such as working manuals, automotive annuals reports, and finical reports,
manufacturing manual, brochures and books of the organization were reviewed and related the
research objectives.
Data analysis was carried out using a tool of SPSS software version 21. The analyzed data are
summarized, described and then presented in the form of frequency and percentages. The
qualitative data analysis was used for triangulation of the quantitative data analysis. The
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CHAPTER 4
This chapter presents the response rate of the respondents which were chosen for the study
together with the demographic information of the sample. Both primary and secondary data
collected for the study was presented with the appropriate data presentation. The finding of the
study and their interpretations and discussions made based on the findings were also discussed in
this part.
Before going directly to discuss bout the result, it‟s better to introduce the respondents
understanding before directly going on to the result because understanding about respondent help
To estimate the accuracy of the information provided by them. In addition, it may give an idea
about how many respondents able to replay the questions forwarded with the acceptable degree
of reliability.
Returned 72 96%
Unreturned 3 4%
The above Table 4.1shows that the questionnaire was distributed to 75 customers of Bishoftu
automotive industry. Among those 96% were kindly enough to fill the questionnaires properly
and returned them up on time. The rest 4% were failed to complete and return the questionnaires.
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All the returned questionnaires those 72 (96%) of the respondent were completed and consider
NUMBER PERCENTAG
Female 20 27.8%
Total 72 100%
Above 39 10 13.8%
Total 72 100%
Diploma 30 41.6%
Degree 20 27.8%
masters 10 13.9%
Total 72 100%
employment
Total 72 100%
- 55 -
From the above table 4.2 show that 72.2% of Bishoftu automotive assembly male, the rest 27.8%
female, this shows majority of the respondents were male. When you see the age majority
respondents were 18-28 years, 66.6%, 19.4% were between 29-39 years and the rest above 39
were 13.8%. So, this implies better knowledge about the activity vehicle assembly of the
organization. With respect to education level 16.6% of the respondents were in certificate, 41.6%
Were in diploma, degree holders were 27.8% and13.9% of the respondent were master holders.
So, we can conclude that all the respondents are educated and more than certificate holder.
Therefore, this shows all respondents were expected to understand the questionnaire and respond
Design 12 16.7%
Quality 52 72.2%
Total 72 100.0%
Design, quality and fuel consumption critical factors for automotive customer choice .customer
choice make examined internal and external factors they set provided the product or service.
From Design, quality and fuel consumption, quality and quantity of the product can be taken as
- 56 -
The above table 4.3 shows that 72.2% of the respondents said that the influential factor for
automotive customer choice Bishoftu automotive are quality, 16.7% the respondent said that the
influential factor for automotive customer choice Bishoftu automotive are Design and the rest
11.1% of the respondent said that the influential factor for automotive customer choice Bishoftu
automotive are Fuel consumption , so from this we can concluded that the influential factor for
automotive customer choice Bishoftu automotive are quality that assemble by the organization.
Table 4.4: competition between assembled vehicles with second hand vehicle
agree 24 33.3%
disagree 16 22.2%
Strongly disagree 0 0%
Total 71 98.6%
Missing 1 1.4%
Total 72 100.0%
The above table 4 shows that 43.1% of the respondent said that level of vehicle assembly
compared to second hand imported vehicles are better strongly agree, 33.3% of the respondent
are level assembled is better second hand vehicles said agree, 22.2% of the respondent said that
level of assembled compare to second hand are in low level and there is no respondent said
Strongly disagree. So we can conclude that from the respondent vehicle assembly compared to
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Table 4.5: Market value of assemble vehicle
fair 47 65.3%
expensive 16 22.2%
cheap 9 12.5%
Total 72 100.0%
Based on the above table 6 65.3% of the respondent said that market price of automotive
industry is fair and 22.2% of the respondent said that the market price is expensive. From this we
high 13 18.1%
Average 41 56.9%
Low 18 25.0%
Total 72 100.0%
The above table 4.6 show that 56.9% of the respondent said that vehicle market effectiveness of
locally assembled vehicle is average, 25% of the respondent said that market effectiveness of
locally assembled vehicle is low and the remaining 18.1% of the respondent believe that market
effectiveness of locally assembled vehicle is high. Thus, we can conclude that market
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Table 4.7: Profit of locally assemble vehicle
High 38 52.8%
average 13 18.1%
low 19 26.4%
Total 70 97.2%
Missing 2 2.8%
Total 72 100.0%
The primary purpose of any organization is to offer service to the society, besides that making a
profit is the major objective of the organization. In order to get profit it is a must make sales to
sustain its existence. The above table 4.7 shows that 52.8% the respondent said that theprofit of
locally assemble vehicle is high, 26.4% of the respondent said that profit of locally assemble
vehicle is low, 18.1% of the respondent said that profit of locally assemble vehicle is average and
the remaining 2 respondents doesn‟t reply the question. Thus from these we can conclude that
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Table 4.8: creating job opportunity for the citizens
yes 38 52.8%
No 20 27.8%
uncertain 11 15.3%
Total 69 95.8%
Missing 3 4.2%
Total 72 100.0%
The above table 4.8 shows 52.8% of the respondent said that job opportunity for the citizens
creates, 27.8% of the respondent said that creating job opportunity for the citizens is not created,
the remaining of 15.3% of the respondent said that creating job opportunity for the citizens
creates uncertain and 4.2 % of the respondent does not replay the question, however this doesn‟t
affect the result. So we can conclude that vehicle assembly is a significant impact in boosting
high 26 36.1%
medium 38 52.8%
low 8 11.1%
Total 72 100.0%
Up on above table 4.9 52.8% in the respondent said that customer satisfaction on the products
of assembled vehicle product at medium level, 36.1% of the respondent said that customer
satisfaction on the products of assembled vehicle product is high and 11.1% of the respondent
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said that customer satisfaction on the products of assembled vehicle product is low. So from this
we can conclude that customer satisfaction on the products of assembled vehicle product is in a
medium level.
17 23.6%
low
28 38.9%
high
27 37.5%
average
72 100.0%
Total
The above table 4.10 shows that 38.9% of the respondent said that technology transfer practices
of the organization is high , 37.5% of the respondent believes technology transfer practices of the
organization is of assembly plant is medium . The remaining 23.6% respondent said that
technology transfer practices of the organization are low. From this we can conclude that
Average 34 47.2%
Poor 11 15.3%
Total 72 100.0%
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The above table 4.11 shows that 47.2% the respondent said that performance of vehicle assembly
in terms of producing quality products of the industry is average performance, 37.5% of the
respondent said that performance of vehicle assembly in terms of producing quality products of
the industry is in very good condition and the remaining 15.3% of the respondent said that
performance of vehicle assembly in terms of producing quality products of the industry is poor.
Thus from the above table we can conclude that performance of vehicle assembly in terms of
industry
Total 71 98.6%
Missing 1 1.4%
Total 72 100.0%
The above table 4.12clearly show that 48.6% of the respondent said that the main hindering the
vehicle assembly industry is Attitude of the society towards second hand imported vehicles,
34.7% of the respondent says the main hindering the vehicle assembly industry is Low
governmental attention to industry, the remaining 15.3% of the respondent said that the main
hindering the vehicle assembly industry is high taxation and 1% of the respondent missed the
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question. Thus, from this we can conclude that is the major challenge for vehicle assembling
Brokers 37 51.4%
Total 72 100.0%
The above table4.13 shows that 51.4% of the respondent said that challenges that are dragging
the of vehicle assembly industry is brokers, 34.7% of the respondent said that challenges that are
dragging the of vehicle assembly industry is brokers and the remaining 13.9% of the respondent
assembly said that challenges that are dragging the of vehicle assembly industry is Custom duties
.Therefore, from this we can conclude up on the above table the main challenges that are
others 5 6.9%
Total 72 100.0%
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In any organization there are challenges which have a negative or positive impact for the
company. Some challenges gives opportunities to see beyond the challenge and give chance to
see things in detail and the overcome the challenge. The other can be the dangerous even for
The above table 4.14 shows that 55.6% of the respondent said that factors negatively impact
vehicle assembly industry is lack of skilled specialized man power, 20 .83% of the respondent
said that lack of raw material, 13.9 of the respondent said that investment to infrastructure and
the remaining 6.94 of the respondent said that factors negatively impact vehicle assembly is
others beside of the alternative provided. So, from this we can conclude that from the above table
shows that lack of skilled specialized man power negatively impact vehicle assembly industry.
High 58 80.6%
Medium 8 11.1%
Low 6 8.3%
Total 72 100.0%
The Ethiopian government support vehicle assembled industry by providing different incentives
The above table4.15 clearly shows that 80.56% of the respondent said that economic
contribution of the vehicle assembly to country is highly significant, 11.1% of the respondent
said that is medium and the remaining 8.3% of the respondent said that low. Therefore, from this
we can conclude that the economic contribution of the vehicle assembly is vital to enhance our
economy.
- 64 -
Table 4.16: Major challenges that affect the vehicle assemble industry
brokers 20 27.8%
Total 72 100.0%
The above table4.16 tells us 55.6% of the respondent said that major challenge of the industry is
Second hand imported vehicle, 27.8%of the respondent believe that major challenge of the
industry is brokers and the remaining 16.7% of the respondent believe that that major challenge
of the industry is government policy to the industry. Therefore, from this we can conclude that
Interview with the target respondents that the main reasons of domination of second hand
vehicles are Ease of maintenance Effective workshops, Resale Values, Availability of spare
Total 72 100.0%
- 65 -
The above table4.16 tells us75% of the respondent vehicle assembly industry creates Job
opportunity, 13.9% of the respondent said that vehicle assembly industry promotes local market
size and the remaining 11.1% of the respondent said that vehicle assembly industry promotes
domestic investment. Therefore, we can conclude that vehicle assembly industry is critically
High 68 94.4%
Medium 3 4.1%
Low 1 1.3%
Total 72 100.0%
Ethiopia imports all of its automotive needs from abroad for the past decades. But nowSome
The above table4.17 tells us 94.4% of the respondent said that contribution of vehicle assembly
for the development automotive sector the country high significant in boosting the sector, 4.1%
of the respondent said that contribution of vehicle assembly for the development automotive
sector is medium and the remaining 1.3% said that the contribution of the vehicle assembly to
automotive industry is low. Therefore, we can conclude that contribution of vehicle assembly for
the development automotive sector the country high significant in boosting the sector.
- 66 -
Table 4.18: Better performance of the industry
Quality 10 13.9 %
Design 8 11.1%
Total 72 100.0%
The above table 4.18tells us 58.3% of the respondent said that the best performance of the
industry is after sell service, 16.7 % of the respondent said that the performance of the industry is
sales price of the organization, 13.9 % of the respondent said that the performance of the industry
is quality that assembled by the industry and the remaining 11.1% of the respondent said that the
performance of the industry is the design of the vehicle that manufacture by the company. Thus,
we can conclude that the best performance of the industry providing after sell service. In
automotive vehicle industry the availability of after sales service is mandatory to consistence the
company and to satisfy to their customers. Because the first question of the customer is after
High 8 11.1%
Medium 48 66.7 %
Low 16 22.2 %
Total 72 100.0%
Source: own Questionnaire (2018)
- 67 -
The above table 4.19 shows that66.7 % of the respondent said that quality assurance of the
industry is at medium level, 22.2 % of the respondent said that quality assurance of the industry
is at low level and the remaining 11.1% of the respondent said that quality assurance of the
industry is at high level. Thus, we can conclude that quality of assurance of the company
High 3 4.2%
Medium 9 12.5%
Low 60 83.3%
Total 72 100.0%
In automotive industry the availability of spare parts is mandatory for consistency of the
organization. The primary questions of vehicle customers the availability of spare parts in stock
From The above table 4.20 shows that83.3% of the respondent said that spare availability of the
organization is low, 12.5% % of the respondent said that spare availability of the organization is
medium and the remaining 4.2% the respondent said that spare availability of the highly
available. Therefore, we can conclude from the resonant is spare availability of the organization
is low.
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CHAPTER 5
5.1 CONCLUSION
The development level of automotive industry in Ethiopia is at low level and we can conclude
that the development level of the industry compare to other developing countries is at infant
growth. Ethiopia is being a trucking country; it has high potential for automotive industry but not
well properly established. Strengthening automotive industry is one of the ways to increase the
The contribution of vehicle assembly industry is highly importance for the national economy, job
opportunity, and technology transfer and employment creation as compared to the investment
outlay of the sector. Therefore, attention to local vehicle assembler in strengthening automotive
industry is must. Upgrading the capacity in maintenance and after sales servicing of automotive
is important. The finding indicates that, the vehicle assembly has a vital role in regard to profit,
economic role, employment opportunity, and technology transfer. Thus, vehicle assembly
industry is still shown a high potential for the future as the economy is at growth stage. The
reason for all major challenges on locally assembled vehicles are Brokers, attitude of the society
towards Second hand imported vehicle and Lack of skilled specialized man power though some
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5.2 RECOMMENDATION
Based on the findings on the data analysis part the following suggestion and recommendations
are forwarded to the companies, policy makers and government bodies. Since the Ethiopian
economy is transforming from agriculture lead economy to industrial economy and vehicle
assembly sector is more related to automotive industry, the government‟s policy making body
should have to give due attention to the assembly of vehicles in difference ways. The Ministry of
industry and investment commission should encourage the vehicle assembly sector by giving
Depending on the finding of the researcher, the following suggestions are forwarded to vehicle
assembly industries:
Ministry of industry should Encouraging the vehicle assembling industry to advance the
Use Technical collaboration approach for technology transfer and qualified skill man
power.
Create awareness to the vehicle assembly partners to understand the economy scale and
the demand of government program and finding the competitiveness of the products of
By offering competitive quality assembled products putting a goal to change the mindset
of the public that has seen inclined to second hand import vehicles.
- 70 -
Finally, the researcher wants to recommend to those researchers who have an interest on study in
assembly industry to perform a study on the role and challenges of vehicle assembly, because the
industry is infant to our country and it requires research and investigation to be strong and to
- 71 -
REFERENCES
Aaron M. (2016): Ethiopia to expand tiny car assembly business in industrial drive.
com/economic-commentary-punitive-import-tax-on-cars-deprive-ethiopians>.
From<https://www.ebrd.com/documents/environment/motor-vehicle>.
smartcities.eu/sites/default/files>.
accessories>.
https://www.industryweek.com/global-economy>.
i
Technology transfer Wikipedia. (2019):available
from<https://en.wikipedia.org/wiki/Technology_transfer>.
manufacturing>.
Yorgos ,P. and Michelle ,H.(2007):The Automotive Industry: Economic Impact And Location
Issues
ii
Appendix -I
Questionnaires guide for supervisor, Technical managers, sale managers, and operational
employees.
Dear respondent
My name is Million kilos. I am currently carrying out a study for the purpose of writing a thesis
as a requirement for the award of masters of Industrial management in Addis Ababa science and
Technology University. The study is on the role and challenges of vehicle assembly in Ethiopia:
in case of Bishoftu automotive industry .You have been selected to participate in this study due
to the importance of your information in the study. The information you provide will be used
only for the purpose of this study and you will be treated with confidentiality. Please circle
If you have any queries, please do not hesitate to contact me and I am available as per your
(E.MAIL= [email protected])
iii
Part I
You are required to provide X signs where required and give specific answer on space provided
M F
5. Nature of employment.
iv
Part II
QUETIONERIES
1. What is the influential factor for automotive customer choice in your company?
2. Do you agree that assembled vehicles better than secondhand imported vehicle?
3. What is your point of view regarding the market price of assemble vehicle?
6. Do you believe that the vehicle assembly creating job opportunity for the citizens?
a) Yes b) No c ) uncertain
7. How do see the job satisfaction on the products of your assembled product?
8. How do you see technology transfer practices in your assembled vehicle company?
v
9. How do you evaluate performance of vehicle assembly in terms of producing quality
products?
10. Which factor is the main hindering the vehicle assembly industry?
a) Attitude of the society towards second hand imported vehicles b) high taxation
11. Besides the above question what other challenges that are dragging the industry?
infrastructure d) others
13 How do you see the economic contribution of vehicle assembly to the industry?
14. Choose the major challenges that affect the vehicle assemble industry from the given
alternatives:
15. What are critical factors which are positively impacting by the vehicle assemble industry?
vi
a) Creates Job opportunity b) promote local market size c) promote domestic
investment
16. How do you see the contribution of vehicle assembly to the growth of automotive
industry?
If you have further comments or suggestions please write on the space given below
vii
Appendix- II: Some of the products manufactured and transferred to customer
Source (BAI)
viii
Appendix- III: Truck Assembly Line
Source (BAI)
ix
x