Chinese EV battery makers are building huge factories in Morocco (2024)

After the United States passed new subsidies designed to boost domestic electric vehicle production and cut into Beijing’s supply chain dominance, Chinese manufacturers began investing in an unlikely place: Morocco.

In the rolling hills near Tangiers and in industrial parks near the Atlantic Ocean, they have announced plans for new factories to make parts for EVs that may qualify for $7,500 credits to car buyers in the United States.

Similar investments have been announced in other countries that share free trade agreements with the United States, including South Korea and Mexico.

But few countries have seen the kind of boom that Morocco has.

At least eight Chinese battery makers have announced new investments in the North African kingdom since President Joe Biden signed the Inflation Reduction Act, the $430 billion U.S. law designed to fight climate change, according to an Associated Press tally.

By moving operations to U.S. trading partners like Morocco, Chinese players that have long dominated the battery supply chain are seeking a pathway to cash in on increasing demand from American carmakers like Tesla and General Motors, said Kevin Shang, a senior battery analyst at the consulting firm Wood Mackenzie.

“Chinese companies definitely don’t want to miss this big party,” he said.

The United States and European Union have bothimposed major new tariffson Chinese vehicle imports since May. The United States alsofinalized eligibility rules governing the tax creditsin May. The latter limit companies with ties to U.S. adversaries, but give 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 “foreign entities of concern” control more than 25% of the company or its board.

Critics say the rules are a giveaway to China and will extend its EV dominance. The Biden administration says the rules pave the way for billions in investment in EV manufacturing in the United States.

Between East and West

In Morocco, a largely agrarian economy where the median income is $2,150 a month, giant industrial parks full of American, European and Chinese component makers have sprung up in the rural outskirts of Tangiers, Kenitra and El Jadida.

Expanding on infrastructure that has made Morocco acar manufacturing hub, they hope to meet growing demand and overcome rules designed to exclude them from the incentives the Inflation Reduction Act is injecting into the U.S. car market, the world’s second-largest.

The rules “have led Chinese producers to increase investment in countries with whom the US has free trade agreements, namely South Korea and Morocco, to get past some IRA barriers,” the policy research firm Rhodium Group said in a report earlier this year.

Some of the new China investments in Morocco explicitly cite the new U.S. subsidies as a reason.

Many are joint ventures that have cited their ability to tinker with board seats and governance to comply with U.S. rules.

That includes CNGR, one of China’s largest battery cathode producers, which in September announced a $2 billion plan to build what it called a “base in the world and pan-Atlantic region” in a joint venture with the Moroccan royal family’s investment group, Al Mada.

Though CNGR owns slightly more than a 50% stake in the project, Thorsten Lahrs, CEO of its Europe division, said he’s confident its cathodes can qualify for the tax credits and change its board composition if necessary. If not, the company would pivot to other markets, including Europe, which just hiked tariffs on electric vehicles imported from China.

“To ride the wave of the IRA, you have to execute fast and comply with its regulations,” he said in an interview before the U.S. finalized its rules. “We have flexibility to be able to comply with all the changes in interpretation or rules.”

The Chinese battery projects include at least three joint ventures and several that reference Morocco’s trade ties with the United States.

The largest among them is Chinese-German battery-maker Gotion High-Tech, which signed a deal with Morocco last year for $6.4 billion investment to construct Africa’s first electric vehicle battery factory.

Investments also include Youshan, a joint venture backed by Korean giant LG Chem and China’s Huayou Cobalt. It declined to provide details about the size of their investment but said the Morocco base means their cathodes “will be supplied to the North American market and subsidized by the U.S. Inflation Reduction Act as Morocco is a signatory to the U.S. Free Trade Agreement.”

LG Chem said the venture would adjust ownership shares as necessary to comply with U.S. rules.

China’s BTR Group’s announcement of a cathode factory in April noted that Morocco’s trade status with the United States and Europe would ensure “a seamless entry for the majority of its manufactured products into these regions.”

Abdelmonim Amachraa, a supply chain expert who previously worked in Morocco’s Ministry of Industry and Trade, said Morocco was profiting from its “ability to coexist when a link can’t be found between China and the United States.”

Officials in Morocco have publicly and privately worked to foster ties up and down the automotive supply chain in both the East and the West. The country hosts more than 250 companies that manufacture cars or their components, including Stellantis and Renault as well as Chinese, Japanese, American and Korean factories that make seats, engines, shock absorbers and wheels. The industry exports almost $14 billion in cars and parts annually.

As the world transitions to electric vehicles, Morocco may appear to be a surprising beneficiary as China, the United States and Europe compete for market share. But its officials worry that anti-competitive policies like tariffs and subsidies could ultimately make it more difficult to lure investment.

Ryad Mezzour, the country’s minister of industry and trade, said in an interview that all the new investment doesn’t tell the full story. Morocco has also lost out on some projects due to what he called “a new age of protectionism.”

A giant loophole

The investment has been a boon to countries like Morocco. But in Washington, Chinese firms have raised alarm by angling to access the American subsidies.

“Under the Biden administration’s electric vehicle regulations, America’s working families will have to watch their hard-earned tax dollars go to line the pockets of Chinese billionaires and businesses with links 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 seeks to grow adoption of EVs and boost domestic manufacturing, too.

The U.S. Energy and Treasury departments have tried to strike a delicate balance, working to reduce reliance on Chinese manufacturers while also ensuring enough vehicles qualify for the credits. The Department of Energy did not respond to questions about what its rules meant for Chinese investments in countries that share free trade agreements with the United States. But in a statement, a spokesperson called the transition to electric vehicles “an industry-wide, global trend” and said new policies “help the US strengthen its energy security and competitiveness—including outcompeting China.”

China has spent years subsidizing companies that extract critical battery minerals, manufacturers of cathodes, anodes and electrolyzers and carmakers like BYD. Those companies’ eagerness to invest in Morocco to cash in on the Inflation Reduction Act shows how decoupling Chinese manufacturers from the supply chain will take years, if not decades, said Chris Berry, an adviser to battery companies and investors.

“There is not going to be a lithium ion battery supply chain that does not have Chinese influence for a long time,” Berry said.

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Chinese EV battery makers are building huge factories in Morocco (2024)


Chinese EV battery makers are building huge factories in Morocco? ›

The largest among them is Chinese-German battery-maker Gotion High-Tech, which signed a deal with Morocco last year for $6.4 billion investment to construct Africa's first electric vehicle battery factory. Investments also include Youshan, a joint venture backed by Korean giant LG Chem and China's Huayou Cobalt.

Who is the world's largest EV battery maker? ›

CATL continues to maintain a significant lead in battery manufacturing both globally and within China, the largest electric vehicle (EV) market in the world.

What percent of EV batteries come from China? ›

The IEA estimates that two-thirds of global battery cell production is in China, while the United States accounts for approximately just 10%. China also leads the global processing of minerals needed for EV batteries, such as graphite and rare earths.

Why is BYD not in the USA? ›

BYD EVs aren't being sold in the U.S. now largely because of 27.5% tariffs on the sale price of Chinese vehicles when they arrive at ports. Donald Trump slapped on the bulk of the tariff, 25%, when he was president, and it was kept in place under Joe Biden.

Who is the number 1 EV producer in the world? ›

China's BYD is set to take Tesla's crown as the world's No. 1 producer of battery electric vehicles. A new report on Tuesday said that Chinese EV giant BYD was set to beat Tesla in battery EV sales in 2024. “This shift underscores the dynamic nature of the global EV market,” said Counterpoint Research analysts.

Which country is the largest EV producer in the world? ›

China dominates the rest of the world in the race for the most EV battery manufacturing, with nearly 66% of global Li-ion manufacturing capacity. Although China is leading the way, its share of worldwide capacity could drop as other countries accelerate battery production.

Are half the batteries for electric vehicles made in China? ›

China holds 78% of the global electric vehicle battery production capacity. These batteries will be used for assembling battery pack modules, and China possesses three-quarters of the world's large-scale lithium-ion battery factories.

Which country makes the most electric car batteries? ›

China is the world's largest EV battery exporter, with around 12% of its EV batteries being exported. Production in Europe and the United States reached 110 GWh and 70 GWh of EV batteries in 2023, and 2.5 million and 1.2 million EVs, respectively.

Is China making cars in Mexico? ›

About 20 Chinese automakers now sell cars in Mexico but none yet have a plant in the country. Chinese vehicles constitute about a third of the total brand offerings in Mexico.

Why is Chinese EV so cheap? ›

Thanks to hefty government investment, cheap labor and their country's robust reserves of key minerals, Chinese automakers have developed a wide range of EVs that are of comparable quality to anything made in the United States but often sell for a fraction of the price.

Is BYD cheaper than tesla? ›

Slashing prices

A few days later, BYD also cut the cost of the newest version of its cheapest car, the Seagull, by 5%. It now has a starting price under $10,000. Although Tesla also cut prices on some models in China last year, the Model 3 and Model Y still sell for more than double BYD's prices.

Who dominates the EV market in China? ›

Chinese companies such as BYD, the biggest global rival to America's Tesla, are forcing Western automakers to change their approach to electric vehicles if they want to remain competitive in a growing industry.

What is the most sold Chinese EV car? ›

The BYD Song was the best-selling EV in China last year, repeating its 2022 success. The model finished 2023 more than 100,000 units ahead of the second-place Tesla Model Y.

Can you buy BYD in the USA? ›

According to BYD, there are no plans to sell these very affordable EVs in the US. But the company—which is scouting plant locations in Mexico—might have a very good economic incentive to do so.

Is BYD owned by China? ›

BYD Company Limited or BYD (Chinese: 比亚迪; pinyin: Bǐyàdí) is a publicly listed Chinese multinational conglomerate manufacturing company headquartered in Shenzhen, Guangdong.

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