Why contract manufacturing could supercharge EVs

From the newsletter 

Alpha Mobility, a Canadian electric vehicle company, has opted for contract assembly of its three-wheelers through Kenya Vehicle Manufacturers (KVM) instead of building its own plant. Contract assembly of EVs in Africa is growing and offers a faster and more cost-efficient pathway to scale EV production. It will also help new players to reduce starting capital expenditure.

• The contract assembly model is already being adopted by fuel-vehicle assemblers transitioning to hybrid production. Associated Vehicle Assemblers (AVA) is engaging with around 13 potential EV clients to utilise its 10,000-unit annual EV assembly capacity.

• Contract assembly has historically boosted vehicle ownership in the fuel sector by lowering prices and offering a wider variety of models.

More details

• Contract assembling is when a local company produces vehicles or components on behalf of a foreign brand without owning the design rights. Local companies can secure such deals by meeting quality standards, having adequate facilities, and building partnerships with OEMs through trade fairs, government programs, or industry networks.

• Mobility Rising projects database shows that the current investor and OEM strategies lean heavily towards full-scale manufacturing, which accounts for an annual capacity of 231,500 units. In contrast, assembly projects contribute only 52,000 units per year, highlighting a significant gap.

• Africa hosts more than 70 vehicle assembly plants located in countries such as South Africa, Morocco, Kenya, Nigeria, Ghana, Egypt, Ethiopia, Rwanda, Uganda, and Tunisia. These nations are already active in the e-mobility sector, making them strong potential markets for EVs. Dedicating even a single assembly line in each plant could boost profitability, expand EV availability, and accelerate industry growth.

• Several companies have already embraced this growing contract assembly model. In addition to AVA and KVM in Kenya, Ethiopia’s Belayneh Kinde Group has launched a 1,000-unit annual EV assembly line, while Egypt’s El Nasr Automotive is assembling Dongfeng EVs with a 20,000-unit capacity.

• For companies with existing ICE assembly plants, setting up an EV line is relatively straightforward since 85–90% of the process is identical. The only major additions involve battery and drivetrain installation. This makes it far quicker and more cost-efficient than building a completely new facility for market entrants.

• Financing will bridge the gap further and make locally assembled EVs more attractive to buyers. In Kenya, car buyers often face the same loan terms for brand-new locally assembled vehicles as they do for 8-year-old used imports, with repayment periods capped at 48–60 months. By introducing longer financing terms of up to 96 months, alongside reduced deposits and interest rates, banks could make new vehicles far more accessible.

Our take

• Setting up assembly lines from scratch has worked well for electric two-wheeler OEMs, often taking less than six months to become operational. This speed has allowed the segment to expand rapidly, outpacing other EV categories in market penetration.

• For four-wheelers, the high capital costs and extended construction timelines have slowed adoption. Projects by OEMs such as Hyundai in Algeria and SAIC in Egypt have stalled, demonstrating the financial and operational risks involved.

• To remain competitive, assemblers of four- and three-wheelers should combine strict quality control with customer-focused incentives. Offering free after-sales support for the first year, extended warranties, and faster delivery can strengthen trust and attract more buyers to locally assembled EVs.