Chinese electric vehicle (EV) manufacturers are investing in Morocco to take advantage of U.S. incentives to promote America’s domestic EV production and reduce Chinese dominance in the global market, AP reported on Wednesday.
Since President Joe Biden signed the Inflation Reduction Act, a $430 billion U.S. law to combat climate change that creates incentives, at least eight Chinese battery manufacturers have disclosed new investments in Morocco. They are setting up new factories near Tangier, northern Morocco, and within industrial parks near the Atlantic Ocean to produce components for electric vehicles that are eligible for $7,500 credits in the United States.
Kevin Shang, a senior battery analyst at the consulting firm Wood Mackenzie, said that China had chosen Morocco as “a pathway to cash in on increasing demand from American carmakers like Tesla and General Motors.”
Industrial parks near Tangiers, Kenitra, and El Jadida now host giant American, European, and Chinese auto component manufacturers. Expanding on Morocco’s existing infrastructure as a “hub for automotive production,” these ventures are looking to meet increasing demand and navigate regulations that restrict their access to the incentives introduced by the Inflation Reduction Act in the U.S.
“Chinese producers are increasing their investment in countries with which the US has free trade agreements, namely South Korea and Morocco, to get past certain IRS barriers,” the policy research firm Rhodium Group said in a report earlier this year.
Some of the new Chinese businesses in Morocco explicitly reference the new U.S. subsidies as a motivating factor. Many of these investments involve joint ventures that allow adjustments to board seats and governance to comply with U.S. regulations. For instance, CNGR, a major Chinese battery cathode producer, announced a $2 billion plan to establish a joint venture with Al Mada, the Moroccan royal family’s investment group, describing it as a “strategic base in the Atlantic region and globally.”
Chinese battery projects in Morocco include multiple joint ventures, leveraging Morocco’s trade relationships with the US. Gotion High-Tech, a Chinese-German battery manufacturer, secured a $6.4 billion deal last year to build Africa’s first electric vehicle battery factory in Morocco. Other investments involve Youshan, a joint venture supported by LG Chem of Korea and Huayou Cobalt of China.
“The Morocco base means their cathodes will be supplied to the North American market and subsidized by the U.S. Inflation Reduction Act as Morocco is a signatory to the U.S. Free Trade Agreement,” Youshan said.
China’s BTR Group, announcing a new cathode factory in April, asserted that “Morocco’s trade status with the United States and Europe would ensure a seamless entry for the majority of its manufactured products into these regions.”
Abdelmonim Amachraa, a supply chain expert with experience in Morocco’s Ministry of Industry and Trade, pointed out Morocco’s ability “to bridge gaps between China and the United States,” thereby contributing to Morocco’s success.
Morocco hosts over 250 companies involved in car manufacturing, including major players like Stellantis and Renault, along with factories from China, Japan, the U.S., and South Korea producing various components. The industry exports nearly $14 billion worth of cars and parts annually.