Ghana’s nascent automobile assembly sector is in danger of unravelling after the removal of a critical tax incentive in the 2026 national budget, with local assemblers warning that operations could grind to a halt once existing vehicle stock runs out.
The Automobile Assemblers Association of Ghana (AAAG) raised the alarm during the Presidential Dialogue convened in Accra by President John Dramani Mahama, where private sector leaders were invited to discuss strategies for accelerating economic growth and establishing Ghana as a regional production hub.
The 2026 budget presented by Finance Minister Cassiel Ato Forson eliminates the 20 percent Value Added Tax (VAT) exemption on applicable duties for locally assembled vehicles, a measure that AAAG says has undermined the commercial basis for local vehicle assembly.
AAAG President Jeffrey Oppong Peprah, who also serves as Chief Executive Officer of Volkswagen Ghana, told the dialogue that the incentive structure had taken years to build and had only recently begun to deliver results. The Ghana Automotive Development Policy, introduced under former Trade and Industry Minister Alan Kyerematen, had combined duty waivers for Semi Knocked Down (SKD) vehicle imports, tariffs of up to 35 percent on fully built imported vehicles, and restrictions on vehicles older than 10 years. The 20 percent VAT exemption, introduced later to address implementation challenges, had created a 25 to 30 percent cost advantage for local assemblers.
“For the last three to four years, these incentives enabled us to assemble vehicles competitively, reduce prices for consumers and justify our investments,” Peprah said. “This decision has effectively pulled the rug from under our feet. The business case for local assembly is no longer viable. 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 warned the consequences could include closure of up to seven assembly plants, loss of more than 400 skilled engineering jobs, and lasting reputational damage to Ghana as an investment destination.
AAAG Vice President Salem Kalmoni, who also serves as Managing Director of Japan Motors Trading Company, said member companies have collectively invested nearly $80 million in assembly facilities, equipment, and workforce development. Japan Motors alone assembled approximately 1,400 vehicles in 2025 and had expansion plans prior to the policy change.
“It is unfortunate that just five years into this journey our investments are under serious threat,” Kalmoni said, warning that once current stock is depleted, operations will cease and job losses will follow.
The Association is calling on the Ministry of Finance, through the Ministry of Trade, Agribusiness and Industry, to restore the VAT exemption immediately or introduce a temporary 35 percent duty increase on imported vehicles as a stop-gap measure. Kalmoni also argued that a thriving local assembly sector would strengthen Ghana’s position under the African Continental Free Trade Area (AfCFTA) by supporting component manufacturing and boosting intra-African trade.
AAAG represents nine registered vehicle assemblers in Ghana, including Toyota Tsusho Manufacturing Ghana, Silver Star Auto, Rana Motors Ghana, Hyundai Motors and Investments Ghana, Honda Manufacturing Ghana, Zonda Tec Ghana, and Kantanka Automobile. The Association says engagements with government have been ongoing but progress remains slow.
