Sub-Saharan Africa faces unique challenges when it comes to the transition to electric vehicles – which are expected to represent 80% of global sales across all segments by 2050 – such as low rates of electricity access, low electricity reliability and low affordability.
However, this does not mean that the continent must be left behind in the electrification of transport.
In 2021 we commissioned an analysis on the opportunities within the e-mobility sector in five sub-Saharan African markets: Ethiopia, Kenya, Nigeria, Rwanda and Uganda.
The analysis, conducted by McKinsey & Company, identified the positive market outlook. Several governments have already developed targets for electrification of transport and introduced incentives for EV adoption such as tax exemptions. More than 20 start-ups have emerged in sub-Saharan Africa focusing on e-mobility, particularly electric two-wheelers (E2Ws).
The analysis suggests that sales of EVs in the focus countries could be 340,000 – 820,000 units in 2025 growing to 3.8-4.9 million units by 2040. Most of these sales will be E2Ws due to their low charging requirements, high fleet turnover, and lifetime cost competitiveness.
These sales numbers will deliver a reduction of up to 24% of CO2 emissions from transport in the focus countries by 2040, and a 5-25% potential reduction in air pollutants
Financing required
For E2Ws (which are expected to comprise >80% of the EVs on the road in Ethiopia, Kenya, Nigeria, Rwanda, and Uganda), $3.5-8.9 billion of costs will need to be financed across asset financing, vehicle import and assembly and charging infrastructure. As other vehicle segments scale up (largely post-2030), additional financing will be required for those segments and to strengthen the electricity grid to support charging of larger vehicles.
The research proposes seven potential financing solutions that could be deployed over the next years to help fill the financing needs, including addressing issues such as the unclear depreciation cycles of EVs, the high cost and low availability of consumer asset finance in sub-Saharan Africa, and the need to fund charging infrastructure (including battery swap stations), underwritten by new business models such as “battery-as-a-service”.