Chinese EV battery firms bet big on Morocco for access to lucrative U.S. EV incentives
Amid new restrictions by the US government, Chinese electric vehicle (EV) battery manufacturers are strategically expanding their footprint into an unlikely location – Morocco, triggering an unexpected twist in the global supply chain.
As an effort to fight climate change, the US signed the Inflation Reduction Act, a $430 billion US climate change bill, that includes significant subsidies for electric vehicles. However, one of the criteria for US EV carmakers to qualify, is that they cannot source critical battery components from companies with ties to certain blacklisted countries, including China. This has sent Chinese battery giants scrambling for a workaround.
Enter Morocco. Boasting a well-developed car manufacturing sector, proximity to key markets, and a signatory to U.S. free trade agreements, the North African country has become an attractive destination for Chinese investments in EV components.
At least eight Chinese companies have announced new investments according to recent reports. This includes a $2 billion plan to build a battery manufacturing base by CNGR, one of China’s largest battery cathode producers and a $6.4 billion investment by Chinese-German battery maker, Gotion High-Tech to build Africa's first electric vehicle battery factory.
Many of these Chinese investments involve joint ventures with local companies or adjustments to ownership structures. This strategic approach enables them to technically comply with US regulations and potentially qualify for the subsidies. This allows them to cash in on increasing demand from American carmakers like Tesla and General Motors.
Interestingly, the influx of Chinese investment is a boon for Morocco's economy, creating jobs and boosting its manufacturing capacity. However, its newfound role comes with underlying concerns. The US government, wary of dependence on China, might implement stricter regulations in the future especially with this recent development already pinging on the radar of lawmakers in the US.
That said, these strategic initiatives highlight Morocco's growing importance as a pivotal link between Eastern and Western supply chains in the global EV sector. Morocco's evolving role in the global EV landscape not only promises economic benefits but also could influence broader international trade dynamics in the electric vehicle industry for years to come.