The German carmaker said in a statement that they plan to assemble cars in Ethiopia soon.
The announcement was made in front of the German president, Frank-Walter Steinmeier as he visited the country.
“Volkswagen brand continues its engagement in emerging countries in Sub-Saharan Africa. In the presence of Frank-Walter Steinmeier, President of the Federal Republic of Germany, a Memorandum of Understanding (MoU) was signed by Thomas Schaefer, Head of the Volkswagen Sub-Saharan Africa Region, and the Commissioner of the Ethiopian Investment Commission (EIC), Abebe Abebayehu, today. Thereby, Volkswagen is taking the fast development of the country into account,” read part of the statement.
Ethiopia becomes the third country in Sub-Saharan Africa to sign a Memorandum of Understanding with Volkswagen. It follows Ghana and Nigeria who both signed MoUs with Volkswagen in August 2018. Volkswagen said they will build a car plant and a training centre.
Ethiopia has the world's lowest rate of car ownership, with only two cars per 1,000 inhabitants, according to a 2014 Deloitte report.
Many Ethiopians have found owning a car too expensive because of import taxes of up to 200%.
Once all taxes are added to an imported car's price tag, it could cost nearly three times more than the retail price in its country of origin.
However, despite the heavy tax burden, there is a rise in the numbers of car imports.
In 2016, government records show that 110,000 cars were imported to Ethiopia, an increase of more than 50% on the previous two years.