Chinese EV Battery Producers Constructing Moroccan Factories
TL/DR –
Chinese manufacturers have started investing in Morocco to build factories for electric vehicle (EV) parts that could qualify for new U.S. subsidies. The move comes amid the U.S.’s efforts to disrupt Beijing’s EV supply chain dominance through the $430 billion Inflation Reduction Act, a law aimed at combating climate change. At least eight Chinese battery makers have announced investments in Morocco since the act’s introduction, seeking a way to profit from growing demand from U.S. carmakers like Tesla and General Motors by relocating operations to American trading partners.
Chinese Manufacturers Eye Morocco in Response to U.S. Electric Vehicle Incentives
Chinese manufacturers are investing in Morocco following the introduction of new subsidies by the U.S. aimed at promoting domestic electric vehicle (EV) production. These investments are seen as a strategy to counter the measures that challenge China’s supply chain dominance.
Manufacturers have declared plans to establish factories near Tangiers and the Atlantic coast to produce EV parts. These components may qualify for $7,500 credits to U.S. car buyers. Similar investments have been made in other nations with U.S. free trade agreements, such as South Korea and Mexico, but Morocco has seen significant growth.
Since President Joe Biden approved the Inflation Reduction Act, at least eight Chinese battery manufacturers have planned new investments in Morocco, according to an Associated Press report.
Transferring operations to nations like Morocco, which have trade agreements with the U.S., allows Chinese companies to capitalize on the growing demand from U.S. carmakers like Tesla and General Motors, says Kevin Shang, a senior battery analyst at Wood Mackenzie.
In response to recent tariffs on Chinese vehicle imports by both the U.S. and the European Union, as well as the finalized tax credit eligibility rules by the U.S., Chinese companies are finding alternative pathways to the EV market.
China’s Manufacturing Expansion in Morocco
In Morocco, an economy heavily based on agriculture, industrial parks filled with American, European, and Chinese component makers are emerging around Tangiers, Kenitra, and El Jadida.
Building on the existing infrastructure that has positioned Morocco as a car manufacturing hub, these companies aim to satisfy increasing demand and navigate the rules designed to exclude them from the Inflation Reduction Act’s incentives in the U.S. car market.
Among the new investments in Morocco, many are joint ventures which have highlighted their capability to adjust board seats and governance to comply with U.S. rules.
Chinese-German Collaboration in Morocco
Notably, Gotion High-Tech, a Chinese-German battery manufacturer, signed a deal with Morocco last year for a $6.4 billion investment to build Africa’s first EV battery factory.
As the global transition to electric vehicles continues, Morocco has emerged as an unexpected beneficiary amidst competition for market share between China, the U.S., and Europe. However, policies like tariffs and subsidies could potentially deter future investment.
Washington’s Concerns about Chinese Investments
While countries like Morocco benefit from Chinese investment, concerns have been raised in Washington about Chinese firms accessing American subsidies.
The complexity of the EV supply chain and the Inflation Reduction Act, which aims to increase EV adoption and stimulate domestic manufacturing, are at the heart of the issue.
China’s eagerness to invest in Morocco to capitalize on the Inflation Reduction Act underscores how separating Chinese manufacturers from the supply chain will be a long-term process, comments Chris Berry, an adviser to battery companies and investors.
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