Removal of tax incentives killing automobile assembly industry – AAAG President

The Automobile Assemblers Association of Ghana (AAAG) says the industry is on its knees following the removal of key tax incentives in the 2026 national budget.

According to the Association, the 2026 National budget presented by the Finance Minister, Mr. Cassiel Ato Forson eliminates the 20 percent VAT exemption on applicable duties for locally assembled vehicles. The AAAG warns that this decision would kill the automobile assembly industry by severely undermining the viability of the sector.

AAAG President, Mr. Jeffrey Oppong Peprah who also serves as CEO of Volkswagen Ghana and Vice President of the African Association of Automotive Manufacturers (AAAM) expressed the Association’s deep concern in his submission to the President, John Mahama in a Presidential dialogue held in Accra and in a post interview with the media.

The dialogue, convened by President, John Dramani Mahama on February 23, 2026, brought together key players in Ghana’s private sector to foster partnerships aimed at accelerating economic growth and national development.

The President encouraged businesses to leverage Ghana’s hosting of the African Continental Free Trade Area (AfCFTA) Secretariat to boost trade, industrialisation, and regional competitiveness, with the broader goal of positioning Ghana as a production hub in West Africa.

Mr. Peprah emphasized that sustained incentives are critical to enabling the private sector to respond effectively to this call. He noted that protecting the Ghana Automotive Development Policy would be essential for maintaining momentum in the local vehicle assembly industry.

The Ghana Automotive Development Policy

Mr. Peprah recalled that the Ghana Automotive Development Policy was introduced about 5 years ago with support from international consultants and subsequently approved by Parliament. The policy aimed to attract global automotive brands to establish assembly plants in Ghana through targeted incentives.

Key provisions included waivers on import duties for Semi Knocked Down (SKD) vehicles, increased duties of up to 35 percent on Completely Built-Up (CBU) vehicles, and a ban on importing vehicles older than 10 years.

Due to implementation challenges, government later introduced alternative incentives, including a 0 percent VAT exemption and the 5–10 percent duty waiver for locally assembled vehicles. According to the AAAG President, these measures created a 25–30 percent cost advantage that made local assembly commercially viable and enjoyed by Ghanaians buying locally assembled vehicles.

“For the past three to four years, these incentives enabled the industry to assemble vehicles competitively, reduce prices for consumers, and justify our investments,”.

Mr. Peprah applauded and recommended to Government to give high focus to the Automobile Industry and ensure the policy is fully implemented.

Industry at Risk

However, Mr. Peprah warned that the removal of the VAT exemption has drastically altered the landscape. “This decision has effectively pulled the rug from under our feet. The business case for local assembly is no longer viable,” he said. “If the policy is not reversed, we will be forced to halt operations. In fact, some global brands have already stopped ordering assembly kits.”

He cautioned that the consequences could be severe, including the loss of more than 400 skilled engineering jobs, the closure of seven assembly plants, and reputational damage to Ghana as an investment destination.

Euros 80 million investment at risk

Adding his voice, Vice President of the AAAG, Mr. Salem Kalmoni who doubles as the Managing Director of Japan Motors Trading Co. Ltd. estimated that AAAG members have collectively invested nearly Euro 80 million in equipment, assembly facilities, and workforce development. Japan Motors alone has assembled about 1,400 vehicles in 2025 and as such had plans for expansion of its assembly facility before the policy shift.

“It is unfortunate that just five years into this journey, our investments are under serious threat,” he said.

Call for Urgent Intervention

The Association is therefore appealing to the Ministry of Finance, through the Ministry of Trade, Agribusiness and Industry, to restore the 20% VAT as a stop-gap measure, or increase duties on imported fully built vehicles to flat 35% as mandated and approved  in the GADP (Ghana Automotive Development Policy).

Mr. Kalmoni explained that local vehicle assembly naturally incurs higher costs at early stages and requires government support until production scales up. He stressed that such support had enabled manufacturers to offer high-quality vehicles at more competitive prices.

He further noted that strengthening local assembly would significantly enhance the impact of the AfCFTA by encouraging component manufacturing and boosting intra-African trade.

Despite ongoing engagements with relevant authorities, the Association says progress has been slow while the industry edges closer to a critical breaking point. “Local assemblers are now on their knees. Once current stock is depleted, operations will cease, leading to inevitable job losses,” Mr. Kalmoni warned.

Other members of the AAAG who were Present at the event were; Ryuta Yoshikawa, Toyota Tsusho Manufacturing Ghana, Madam Yang Yang , Zonda Tec Ghana and Kassem Odaymat, Rana Motors Ghana among others.

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