Lifan Industry Group Co., a Chinese automaker, plans to spend $3.5 million moving into a new vehicle-assembly plant in Ethiopia next year as it seeks to expand in Africa, General Manager Liu Jiang said.
The company’s Ethiopian unit, Yangfan Motors Plc, may begin manufacturing cars in the Horn of Africa nation and spend as much as $30 million over five years if sales continue to grow, he said in an interview in the capital, Addis Ababa.
Lifan is basing its African operations in Ethiopia because of the country’s “good relations” with China, its growing economy, low crime rate and political stability, Liu said on Dec. 14. Ethiopia is Africa’s second-most populous nation.
“The economy is growing, everything is growing,” he said. “Of course it has great potential.”
China is Ethiopia’s biggest trading partner, according to the World Bank. Chinese commercial investment in Ethiopia totals $450 million and was $58.5 million in 2010, the Washington-based lender said an e-mailed report on Dec. 14. Foreign investment in Ethiopia is expected to increase to 4.5 percent of gross domestic product this fiscal year from 3.1 percent in 2011, according to the International Monetary Fund.
Yangfan is negotiating a deal with the Chinese-owned Eastern Industry Zone in the Ethiopian town of Dukem, about 30 kilometers (19 miles) southeast of Addis Ababa, and expects to move by February, Liu said. It has spent about $5 million in Ethiopia over three years.
The company will earn 240 million Ethiopian birr ($13.2 million) from the sale of 800 cars this year, which is a third of the market for cars assembled in Ethiopia, and plans to sell 50 percent more next year, he said.
Ethiopia’s government operates a mixed economy in which state companies monopolize or dominate key industries including telecommunications, banking and power, while it encourages private investment in areas such as manufacturing and agriculture. The country dropped two places to 127th out of 185 economies in the World Bank’s Doing Business 2013 survey, with low scores for protecting investors and cross-border trade.