Chinese Firms Tap Morocco to Benefit from US EV Subsidies

Chinese automakers are looking to Morocco in reaction to recent US subsidies meant to increase domestic production of electric vehicles (EVs). Chinese businesses have poured a lot of money into this North African country in an attempt to take advantage of the $7,500 credit offered to US car buyers.

Morocco’s strategic location and free trade agreements with the US have made it a focus area for these investments. Following the Inflation Reduction Act’s enactment, which provides $430 billion to address climate change, at least eight Chinese battery manufacturers have declared their intention to open up shop in Morocco. These include well-known companies like CNGR and Gotion High-Tech, who have detailed important projects they are working on in conjunction with regional organizations.

The new regulations under the Inflation Reduction Act limit subsidies to businesses that have close ties to US foes, but also give automakers time to wean themselves off of Chinese supply chains. Chinese companies are creating joint ventures and changing their company structures to conform to US laws in order to get around these prohibitions.

Morocco is attractive because of its well-established auto industry infrastructure, which includes large facilities close to Tangiers, Kenitra, and El Jadida. These areas are home to a diverse range of Chinese, European, and American component manufacturers, creating a strong automotive industry. The nation’s efforts to draw in these kinds of investments are clear from the more than 250 automakers and their approximately $14 billion in yearly exports.

Among the new endeavors, CNGR’s $2 billion project is noteworthy. It was established in partnership with Al Mada, the investment arm of the Moroccan royal family. Even with CNGR controlling most of the business, the company is still certain it can meet US tax credit criteria by reorganizing the board if needed.

Similarly, Gotion High-Tech has pledged $6.4 billion to construct Morocco’s first EV battery facility, highlighting Morocco’s increasing significance in the world’s EV supply chain. A joint venture between LG Chem and Huayou Cobalt, which aims to service the North American market, is one of the other notable investments.

Morocco’s strategic advantage is highlighted by these developments, although worries about possible protectionist measures from important markets persist. The global shift towards electric vehicles has brought with it both potential and challenges, as recognized by Moroccan politicians, such as Minister of Industry and Trade Ryad Mezzour.

The US Treasury and Energy ministries are still trying to strike a compromise between lowering reliance on Chinese producers and making sure that enough cars are eligible for subsidies. Morocco’s position as a manufacturing hub is expected to increase as the global EV industry develops, propelled by investments from the East and the West.