The Automobile Assemblers Association of Ghana (AAAG) has warned that Ghana’s local automobile assembly industry is facing a major crisis following the removal of key tax incentives in the 2026 national budget.
According to the Association, the 2026 budget presented by Finance Minister Cassiel Ato Forson eliminates the 20 percent VAT exemption on applicable duties for locally assembled vehicles, a move industry players say could cripple the sector.
Speaking during a presidential dialogue with the private sector in Accra, AAAG President Jeffrey Oppong Peprah described the policy shift as a serious threat to the viability of local vehicle assembly operations.
Peprah, who is also Chief Executive Officer of Volkswagen Ghana and Vice President of the African Association of Automotive Manufacturers (AAAM), said the incentives introduced under the Ghana Automotive Development Policy had been crucial in attracting global automotive brands to Ghana.
The presidential dialogue, convened by President John Dramani Mahama on February 23, 2026, brought together private sector stakeholders to discuss strategies for economic growth, industrialisation and Ghana’s positioning under the African Continental Free Trade Area (AfCFTA).
Peprah explained that the Ghana Automotive Development Policy, introduced about five years ago and approved by Parliament, was designed to promote local assembly through targeted incentives, including waivers on import duties for Semi Knocked Down (SKD) vehicles, higher import duties on Completely Built-Up (CBU) vehicles, and restrictions on older vehicle imports.
According to him, government later introduced additional measures such as a zero percent VAT exemption and duty waivers ranging between five and 10 percent for locally assembled vehicles after implementation challenges emerged.
“These incentives enabled the industry to assemble vehicles competitively, reduce prices for consumers, and justify our investments,” he stated.
However, he warned that removing the VAT exemption has significantly weakened the business case for local assembly.
“This decision has effectively pulled the rug from under our feet. The business case for local assembly is no longer viable,” Peprah 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 industry could suffer severe consequences, including the collapse of seven assembly plants, the loss of more than 400 skilled engineering jobs, and damage to Ghana’s reputation as an investment destination.
Vice President of the AAAG, Salem Kalmoni, who also serves as Managing Director of Japan Motors Trading Co. Ltd., revealed that members of the association have collectively invested nearly €80 million in assembly infrastructure, equipment and workforce development.
According to him, Japan Motors alone assembled about 1,400 vehicles in 2025 and had planned further expansion before the latest policy changes.
“It is unfortunate that just five years into this journey, our investments are under serious threat,” he lamented.
The Association is therefore appealing to the government, through the Ministry of Trade, Agribusiness and Industry and the Ministry of Finance, to restore the 20 percent VAT exemption as an interim measure or fully implement the Ghana Automotive Development Policy by increasing duties on imported fully built vehicles to 35 percent.
Kalmoni argued that local assembly industries naturally face higher production costs during their early stages and require government support until production scales up sufficiently.
He further stressed that strengthening Ghana’s automobile assembly sector would support the objectives of the AfCFTA by encouraging component manufacturing and boosting intra-African trade.
Despite ongoing engagements with authorities, the Association says little progress has been made 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,” Kalmoni warned.
Other industry representatives present at the dialogue included officials from Toyota Tsusho Manufacturing Ghana, Zonda Tec Ghana and Rana Motors Ghana.