Serrari Group

In response to the United States’ new subsidies aimed at enhancing domestic electric vehicle (EV) production, Chinese manufacturers are increasingly investing in Morocco. This North African country has become an unexpected hotspot for such investments, with plans for new factories near Tangiers and industrial parks along the Atlantic Ocean. These factories aim to produce parts for EVs that could qualify for significant tax credits under the U.S. Inflation Reduction Act (IRA).

The IRA, a $430 billion legislation signed by President Joe Biden, seeks to promote EV manufacturing within the U.S. and reduce dependency on Chinese supply chains. To navigate the restrictions imposed by the new rules, which limit the involvement of companies with significant Chinese ties, Chinese battery makers are strategically relocating operations to countries like Morocco, which enjoys a free trade agreement with the United States.

Strategic Relocation Amid Trade Barriers

Recent tariffs imposed by the United States and the European Union on Chinese vehicle imports have intensified the need for Chinese firms to seek alternative production hubs. By establishing operations in Morocco, Chinese manufacturers aim to bypass these trade barriers and qualify for the lucrative U.S. tax credits, offering up to $7,500 to EV buyers.

Morocco’s burgeoning industrial landscape, with its extensive network of American, European, and Chinese component makers, is well-positioned to support this influx of investment. The country’s established car manufacturing infrastructure, coupled with its strategic location, makes it an ideal gateway for Chinese firms to maintain their presence in the EV supply chain while complying with U.S. regulations.

Major Investments and Collaborations

Among the notable investments is a $2 billion venture by CNGR, one of China’s largest battery cathode producers. Partnering with Morocco’s royal family’s investment group, Al Mada, CNGR aims to establish a significant base in the region. Thorsten Lahrs, CEO of CNGR’s Europe division, expressed confidence in the project’s compliance with U.S. tax credit requirements, emphasizing the company’s readiness to adapt its board composition if needed.

Gotion High-Tech, a Chinese-German battery maker, has also committed $6.4 billion to construct Africa’s first EV battery factory in Morocco. Another key investment comes from Youshan, a joint venture between Korea’s LG Chem and China’s Huayou Cobalt, which cited Morocco’s advantageous trade status with the U.S. as a primary factor in its decision.

Morocco’s Expanding Automotive Sector

Morocco’s automotive industry, which includes over 250 companies manufacturing cars and components, is experiencing substantial growth. The sector, exporting nearly $14 billion in cars and parts annually, includes major players like Stellantis, Renault, and various Chinese, Japanese, American, and Korean factories.

As the global automotive industry shifts towards electric vehicles, Morocco is positioned to benefit significantly. However, Moroccan officials remain cautious about the potential impact of anti-competitive policies like tariffs and subsidies, which could hinder future investments.

The Future of EV Manufacturing in Morocco

The strategic relocation of Chinese EV manufacturers to Morocco highlights the complexities of the global EV market. As nations compete for technological and market leadership, Morocco’s ability to navigate these dynamics will be crucial. With its strategic position and expanding industrial capabilities, Morocco is set to play a vital role in the future of electric vehicle manufacturing, balancing interests between East and West.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

4th July, 2024

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