Tangier: After the United States passed new subsidies to boost domestic electric vehicle production and cut into Beijing’s supply chain dominance, Chinese manufacturers began investing in an unexpected place: MoroccoIn the hills near Tangiers and in industrial parks near the Atlantic Ocean, they have announced plans for new factories to make parts. EVs Which could qualify for a US$7,500 credit for car buyers in the United States.
Similar Investment It has also been announced in other countries that share free trade agreements with the United States, including South Korea and Mexico.
But very few countries have seen a boom like Morocco.
At least eight Chinese battery makers have announced new investments in the North African kingdom since President Joe Biden signed the Inflation Reduction Act, a $430 billion U.S. law designed to fight climate change, according to an Associated Press count.
By moving their operations to U.S. trading partners such as Morocco, Chinese companies, which have long dominated the battery supply chain, are looking for a way to profit from growing demand from American carmakers such as Tesla and General Motors, said Kevin Shang, senior battery analyst at consultancy firm Wood Mackenzie.
“Chinese companies certainly won’t want to miss this big party,” he said.
Both the United States and the European Union have imposed major new tariffs on Chinese vehicle imports from May.
The United States in May also finalised eligibility rules governing the tax credit. The latter limits companies with ties to US adversaries, but gives carmakers time to reduce their reliance on China. To qualify for the subsidies, carmakers cannot source critical minerals or battery parts from manufacturers in which China and other “concerned foreign entities” control more than 25 per cent of the company or its board.
Critics say the rules give China a free hand and will increase its dominance in EVs. The Biden administration says the rules pave the way for billions of dollars of investment in EV manufacturing in the United States.
Between East and West
In Morocco, a largely agricultural economy where the average income is US$2,150 a month, huge industrial parks filled with American, European and Chinese component manufacturers have sprung up in the rural areas of Tangiers, Kenitra and El Jadida.
By expanding the infrastructure that has made Morocco a hub of car manufacturing, they hope to meet growing demand and overcome regulations that deny them the incentives offered by the Inflation Reduction Act in the world’s second-largest U.S. car market.
Policy research firm Rhodium Group said in a report earlier this year that these regulations have “led to Chinese producers increasing investment in countries with which the U.S. has free trade agreements, such as South Korea and Morocco, to bypass some of the IRA barriers.”
Some of China’s new investments in Morocco explicitly cite new US subsidies as the reason.
Many of these are joint ventures, which have cited their ability to shuffle board seats and governance to comply with US regulations.
This includes CNGR, one of China’s largest battery cathode producers, which in September announced a US$2 billion plan to build a “global and pan-Atlantic base” in a joint venture with Al Mada, the investment group of the Moroccan royal family.
Although CNGR has a little more than a 50 percent stake in the project, Thorsten Lahrs, CEO of its Europe division, said he is confident its cathodes could qualify for tax credits and that its board composition could be changed if necessary. If that doesn’t happen, the company will look to other markets, including Europe, which recently raised tariffs on electric vehicles imported from China.
“To ride the wave of the IRA, you have to act swiftly and comply with its rules,” he said in an interview before the U.S. finalized its rules. “We have the flexibility to comply with all changes in interpretation or rules.”
The Chinese battery projects involve at least three joint ventures, and several of these projects reference Morocco’s business relations with the United States.
The largest of these is Chinese-German battery maker Gotian Hi-Tech, which last year signed a deal with Morocco to invest US$6.4 billion to build Africa’s first electric vehicle battery factory.
The investors also include Yushan, a joint venture backed by Korean giant LG Chem and China’s Huayu Cobalt. It declined to give details about the size of its investment, but said the Morocco base means its cathodes “will be supplied to the North American market and subsidised by the US Inflation Reduction Act as Morocco is a signatory to the US Free Trade Agreement.”
LG Chem said the venture will adjust ownership shares as needed to comply with U.S. regulations.
An announcement of a cathode factory by China’s BTR Group in April said Morocco’s trading status with the United States and Europe would “ensure unhindered entry for most of its manufactured products into these regions.”
Abdelmoneim Amachra, a supply chain expert who previously worked at Morocco’s Ministry of Industry and Trade, said Morocco is benefiting from “its ability to coexist in a situation of no contact between China and the United States.”
Moroccan officials have worked publicly and privately to foster ties up and down the automotive supply chain, both East and West. The country has more than 250 companies that make cars or their parts, including Stellantis and Renault as well as Chinese, Japanese, American and Korean factories that make seats, engines, shock absorbers and wheels. The industry exports about US$14 billion worth of cars and parts annually.
Morocco is poised to become an amazing beneficiary of the worldwide shift to electric vehicles as China, the US and Europe compete for market share. But its officials worry that anti-competitive policies such as tariffs and subsidies could make it even more difficult to attract investment.
Riad Mezouar, the country’s Minister of Industry and Trade, said in an interview that all the new investments do not tell the whole story. Morocco has also lost some projects, which he called “a new era of protectionism.”
a huge drawback
This investment has proved a boon for countries like Morocco. But in Washington, Chinese firms Trying to gain access to US subsidies has set off alarm bells.
“Under the Biden administration’s electric vehicle rules, America’s working families will have to watch as their hard-earned tax dollars are spent lining the pockets of Chinese billionaires and businesses tied to the Chinese Communist Party,” U.S. Rep. Jason Smith, a Missouri Republican, said of the new guidelines.
But at issue are the complexities of both the electric vehicle supply chain and the Inflation Reduction Act, which aims to increase the adoption of electric vehicles and boost domestic manufacturing.
The U.S. Energy and Treasury departments have tried to strike a delicate balance between reducing reliance on Chinese manufacturers while also ensuring enough vehicles qualify for the credits.
The Energy Department did not respond to a question about what effect its rules would have on Chinese investment in countries that share free trade agreements with the United States.
But in a statement, the spokesperson called the transition to electric vehicles “an industry-wide, global trend” and said the new policies “will help the U.S. strengthen its energy security and competitiveness — including by outcompeting China.”
China has for many years provided subsidies to companies that extract crucial battery minerals, manufacturers of cathodes, anodes and electrolysers, and car manufacturers such as BYD.
Chris Berry, an adviser to battery companies and investors, said the eagerness of those companies to invest in Morocco to take advantage of the Inflation Reduction Act shows that it will take years, if not decades, to wean Chinese manufacturers off the supply chain.
“There will be no lithium-ion battery supply chain that is not dominated by Chinese influence for a long time,” Berry said.
Similar Investment It has also been announced in other countries that share free trade agreements with the United States, including South Korea and Mexico.
But very few countries have seen a boom like Morocco.
At least eight Chinese battery makers have announced new investments in the North African kingdom since President Joe Biden signed the Inflation Reduction Act, a $430 billion U.S. law designed to fight climate change, according to an Associated Press count.
By moving their operations to U.S. trading partners such as Morocco, Chinese companies, which have long dominated the battery supply chain, are looking for a way to profit from growing demand from American carmakers such as Tesla and General Motors, said Kevin Shang, senior battery analyst at consultancy firm Wood Mackenzie.
“Chinese companies certainly won’t want to miss this big party,” he said.
Both the United States and the European Union have imposed major new tariffs on Chinese vehicle imports from May.
The United States in May also finalised eligibility rules governing the tax credit. The latter limits companies with ties to US adversaries, but gives carmakers time to reduce their reliance on China. To qualify for the subsidies, carmakers cannot source critical minerals or battery parts from manufacturers in which China and other “concerned foreign entities” control more than 25 per cent of the company or its board.
Critics say the rules give China a free hand and will increase its dominance in EVs. The Biden administration says the rules pave the way for billions of dollars of investment in EV manufacturing in the United States.
Between East and West
In Morocco, a largely agricultural economy where the average income is US$2,150 a month, huge industrial parks filled with American, European and Chinese component manufacturers have sprung up in the rural areas of Tangiers, Kenitra and El Jadida.
By expanding the infrastructure that has made Morocco a hub of car manufacturing, they hope to meet growing demand and overcome regulations that deny them the incentives offered by the Inflation Reduction Act in the world’s second-largest U.S. car market.
Policy research firm Rhodium Group said in a report earlier this year that these regulations have “led to Chinese producers increasing investment in countries with which the U.S. has free trade agreements, such as South Korea and Morocco, to bypass some of the IRA barriers.”
Some of China’s new investments in Morocco explicitly cite new US subsidies as the reason.
Many of these are joint ventures, which have cited their ability to shuffle board seats and governance to comply with US regulations.
This includes CNGR, one of China’s largest battery cathode producers, which in September announced a US$2 billion plan to build a “global and pan-Atlantic base” in a joint venture with Al Mada, the investment group of the Moroccan royal family.
Although CNGR has a little more than a 50 percent stake in the project, Thorsten Lahrs, CEO of its Europe division, said he is confident its cathodes could qualify for tax credits and that its board composition could be changed if necessary. If that doesn’t happen, the company will look to other markets, including Europe, which recently raised tariffs on electric vehicles imported from China.
“To ride the wave of the IRA, you have to act swiftly and comply with its rules,” he said in an interview before the U.S. finalized its rules. “We have the flexibility to comply with all changes in interpretation or rules.”
The Chinese battery projects involve at least three joint ventures, and several of these projects reference Morocco’s business relations with the United States.
The largest of these is Chinese-German battery maker Gotian Hi-Tech, which last year signed a deal with Morocco to invest US$6.4 billion to build Africa’s first electric vehicle battery factory.
The investors also include Yushan, a joint venture backed by Korean giant LG Chem and China’s Huayu Cobalt. It declined to give details about the size of its investment, but said the Morocco base means its cathodes “will be supplied to the North American market and subsidised by the US Inflation Reduction Act as Morocco is a signatory to the US Free Trade Agreement.”
LG Chem said the venture will adjust ownership shares as needed to comply with U.S. regulations.
An announcement of a cathode factory by China’s BTR Group in April said Morocco’s trading status with the United States and Europe would “ensure unhindered entry for most of its manufactured products into these regions.”
Abdelmoneim Amachra, a supply chain expert who previously worked at Morocco’s Ministry of Industry and Trade, said Morocco is benefiting from “its ability to coexist in a situation of no contact between China and the United States.”
Moroccan officials have worked publicly and privately to foster ties up and down the automotive supply chain, both East and West. The country has more than 250 companies that make cars or their parts, including Stellantis and Renault as well as Chinese, Japanese, American and Korean factories that make seats, engines, shock absorbers and wheels. The industry exports about US$14 billion worth of cars and parts annually.
Morocco is poised to become an amazing beneficiary of the worldwide shift to electric vehicles as China, the US and Europe compete for market share. But its officials worry that anti-competitive policies such as tariffs and subsidies could make it even more difficult to attract investment.
Riad Mezouar, the country’s Minister of Industry and Trade, said in an interview that all the new investments do not tell the whole story. Morocco has also lost some projects, which he called “a new era of protectionism.”
a huge drawback
This investment has proved a boon for countries like Morocco. But in Washington, Chinese firms Trying to gain access to US subsidies has set off alarm bells.
“Under the Biden administration’s electric vehicle rules, America’s working families will have to watch as their hard-earned tax dollars are spent lining the pockets of Chinese billionaires and businesses tied to the Chinese Communist Party,” U.S. Rep. Jason Smith, a Missouri Republican, said of the new guidelines.
But at issue are the complexities of both the electric vehicle supply chain and the Inflation Reduction Act, which aims to increase the adoption of electric vehicles and boost domestic manufacturing.
The U.S. Energy and Treasury departments have tried to strike a delicate balance between reducing reliance on Chinese manufacturers while also ensuring enough vehicles qualify for the credits.
The Energy Department did not respond to a question about what effect its rules would have on Chinese investment in countries that share free trade agreements with the United States.
But in a statement, the spokesperson called the transition to electric vehicles “an industry-wide, global trend” and said the new policies “will help the U.S. strengthen its energy security and competitiveness — including by outcompeting China.”
China has for many years provided subsidies to companies that extract crucial battery minerals, manufacturers of cathodes, anodes and electrolysers, and car manufacturers such as BYD.
Chris Berry, an adviser to battery companies and investors, said the eagerness of those companies to invest in Morocco to take advantage of the Inflation Reduction Act shows that it will take years, if not decades, to wean Chinese manufacturers off the supply chain.
“There will be no lithium-ion battery supply chain that is not dominated by Chinese influence for a long time,” Berry said.
