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Chinese Companies Look to Morocco to Capitalise on US Electric Vehicle Subsidies

Chinese automakers are investing in Morocco to capitalise on US electric vehicle incentives. Morocco has experienced an increase in investment from Chinese battery manufacturers after the Inflation Reduction Act was adopted. Chinese enterprises hope to capitalise on increased demand from American automakers such as Tesla and General Motors.

Credit: AP Photo/ Achmad Ibrahim

These incentives are intended to limit China's dominance in the EV supply chain. Chinese companies are now investing in Morocco, where they intend to build facilities to create EV parts that are eligible for the US$7,500 tax credit available to car buyers in the United States.

Morocco has experienced a significant surge in investments from at least eight Chinese battery makers since President Joe Biden signed the Inflation Reduction Act, a US$430 billion law aimed at combating climate change. By shifting their operations to countries with free trade agreements with the US, such as Morocco, Chinese companies hope to tap into the growing demand from American automakers like Tesla and General Motors.

Kevin Shang, a senior battery analyst at Wood Mackenzie, explains that Chinese companies do not want to miss out on the opportunity presented by the new subsidies. He states, "Chinese companies definitely don't want to miss this big party."

Renault factory
Credit: AP Photo

The US and the European Union have recently imposed substantial tariffs on Chinese vehicle imports. In addition, the US has finalised eligibility rules for the tax credits, which limit companies with ties to US adversaries. To qualify for the subsidies, carmakers must ensure that critical minerals and battery parts are not sourced from manufacturers where China or other "foreign entities of concern" control more than 25% of the company or its board.

Morocco, with its expanding industrial parks and trading relations with the United States, has emerged as a popular location for Chinese investors. The country has seen the development of massive industrial parks near Tangiers and the Atlantic Ocean, which house American, European, and Chinese component manufacturers. These investments aim to address the growing demand for electric vehicles while also overcoming the restrictions imposed by the Inflation Reduction Act.

Chinese battery manufacturers, notably CNGR, Gotion High-Tech, and Youshan, have established joint ventures in Morocco to take advantage of the increased subsidies. These companies have demonstrated their capacity to comply with US standards by altering board seats and governance structures as needed. The investments also take advantage of Morocco's trade position with the United States and Europe, providing quick access to these markets.

 Renault factory
Credit: AP Photo

Morocco has actively promoted relationships with both Eastern and Western automotive supply chains, with over 250 companies involved in car manufacture and component production. However, Moroccan officials are concerned about anti-competitive policies such as tariffs and subsidies, which could stymie future investment.

While China's investments in Morocco have benefited the country, they have caused alarm in the United States. Critics claim that American tax monies are being utilised to benefit Chinese millionaires and firms affiliated with the Chinese Communist Party. The complexity of the EV supply chain, combined with the Inflation Reduction Act, make it difficult to strike a compromise between lowering reliance on Chinese manufacturers and ensuring that enough vehicles qualify for tax credits.

Chinese investments in Morocco demonstrate the long-term importance of Chinese manufacturers in the global lithium-ion battery supply chain. Experts believe that decoupling from Chinese manufacturers will take years, if not decades, due to their significant subsidies and investments in essential battery materials and EV production.

  • Chinese manufacturers are investing in Morocco to benefit from US electric vehicle subsidies.

  • Morocco has seen a surge in investments from Chinese battery makers since the Inflation Reduction Act was signed.

  • Chinese companies aim to tap into the growing demand from American automakers like Tesla and General Motors.

Source: AP NEWS

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