Chinese EV Manufacturers Expand to Morocco, Eyeing US Market Access

Chinese manufacturers are rushing to Morocco. Eight of them have announced plans to set up new factories to manufacture parts for electric vehicles near Tangier and in industrial parks near the Atlantic Ocean, which could entitle buyers of cars in the United States to $7,500 credits, reports Associated Press. They plan to expand their investments to other countries that share free trade agreements with the United States, including South Korea and Mexico. This Chinese strategy has been in place since the enactment by President Joe Biden of the Inflation Reduction Act, the $430 billion U.S. law designed to fight climate change. "By shifting their operations to U.S. trade partners like Morocco, the Chinese actors who have long dominated the battery supply chain are seeking a way to capitalize on the growing demand from U.S. automakers like Tesla and General Motors," said Kevin Shang, senior battery analyst at the consulting firm Wood Mackenzie.

Since May, both the United States and the European Union (EU) have imposed significant new tariffs on imports of Chinese vehicles. That same month, the United States also finalized the eligibility rules governing the tax credits in May. These limit companies with ties to U.S. adversaries, but give automakers time to reduce their dependence on China, it is reported. To be eligible for the subsidies, automakers cannot source critical minerals or battery components from manufacturers in which China and other "concerning foreign entities" control more than 25% of the company or its board of directors. In the eyes of some observers, these rules constitute a "gift" to China and they will extend its dominance over electric vehicles. According to the Biden administration, these rules pave the way for billions of dollars in investments in electric vehicle manufacturing in the United States.

"These rules have led Chinese producers to increase their investments in countries with which the United States has free trade agreements, namely South Korea and Morocco, to circumvent some of the IRA barriers," the Rhodium Group policy research firm said in a report published earlier this year. Among these Chinese companies are CNGR, one of China’s largest battery cathode producers, which announced in September a $2 billion plan to build a "base in the world and the pan-Atlantic region" in a joint venture with the Moroccan royal family investment group, Al Mada, and Gotion High-Tech, the Sino-German company that signed an agreement with Morocco last year for a $6.4 billion investment to build Africa’s first electric vehicle battery factory.