Volkswagen has signed a memorandum of understanding (MoU) with Ethiopia which should lead to local vehicle assembly using some locally made components.

Over the last decade, GDP growth in Ethiopia was above 8% – one of the highest worldwide, the automaker noted.

"Ethiopia is a priority and focus country for Germany under the G20 'Compact with Africa' initiative," the automaker said in a statement.

Volkswagen will focus on establishment of a vehicle assembly facility, localisation of automotive components, introduction of mobility concepts such as app-based car sharing and ride hailing as well as the opening of a training centre. It will also work closely with the Ethiopian higher education and training institutions for skills development and capacity building of local talent.

VW said: "As one of the fastest growing economies and with the second highest population in the continent, Ethiopia is an ideal country to advance our Sub-Saharan Africa development strategy. Additionally, Volkswagen intends on tapping into existing expertise and strategic resources in Ethiopia to establish a thriving automotive components industry."

Ethiopia becomes the third country in Sub-Saharan Africa to sign a MoU with Volkswagen. It follows Ghana and Nigeria who both signed MoUs in August 2018. In Ghana, Volkswagen will establish a vehicle assembly facility and conduct a feasibility study for an integrated mobility solutions concept. In Nigeria, Volkswagen implemented a phased approach of vehicle assembly with long term view of establishing Nigeria as an automotive hub in West Africa.

Volkswagen has been manufacturing vehicles in South Africa since 1951. In Africa, Volkswagen also has vehicle assembly operations in Algeria, Kenya and Rwanda.

"Although the African automotive market is comparatively small today, the region has a bright outlook to develop into an automotive growth market of the future," VW added.