TANGIER: Taiwanese companies began investing in an unlikely place: Morocco after the United States passed new grants designed to boost domestic electronic vehicle output and cut into Beijing’s supply chain supremacy. They have made plans for new companies to manufacture parts for EVs that may qualify for USD 7, 500 funds to car buyers in the United States in the rolling hills near Tangiers and in business gardens near the Atlantic Ocean.
Similar assets have been made in different nations that have free trade agreements with the US, including South Korea and Mexico.
Some nations, however, have experienced the growth that Morocco has.
Since President Joe Biden signed the USD 430 billion climate change laws, the Inflation Reduction Act, an Associated Press count, at least eight Foreign cell manufacturers have made new purchases in the North African nation.
Foreign players that have long dominated the power supply chain are looking to capitalize on the growing demand from British carmakers like Tesla and General Motors, according to Kevin Shang, a mature power scientist at the consulting company Wood Mackenzie. By shifting operations to US trading partners like Morocco.
” Chinese companies definitely do n’t want to miss this big party”, he said.
Since May, the United States and the European Union have both imposed significant new tariffs on Chinese car imports.
In May, the United States made the final decisions regarding the eligibility for tax credits. The latter restricts carmakers ‘ reliance on China while limiting companies ‘ ties to US adversaries. Carmakers must obtain crucial minerals or battery parts from companies that have more than 25 % of the business or its board of directors in order to be eligible for the subsidies.
Critics claim that China will gain more EV dominance from the rules. According to the Biden administration, the regulations allow for billions to be invested in American EV manufacturing.
Between East and West
In Morocco, a largely agrarian economy where the median income is USD 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.
They hope to meet growing demand and overturn rules that would prevent them from receiving the incentives the Inflation Reduction Act is introducing into the second-largest US car market in the world by expanding on the infrastructure that has made Morocco a center for car manufacturing.
According to a report released earlier this year, policy research firm Rhodium Group claimed that the rules “have encouraged Chinese producers to increase investment in countries with which the US has free trade agreements, particularly South Korea and Morocco, to overcome some IRA barriers.”
Some of the new China investments in Morocco explicitly cite the new US subsidies as a reason.
Many are joint ventures that have cited their ability to tinker with board seats and governance in order to abide by US regulations.
That includes CNGR, one of China’s largest battery cathode producers, which in September announced a USD 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.
Thorsten Lahrs, CEO of CNGR’s Europe division, expressed confidence in its cathodes ‘ ability to receive the tax credits and alter its board composition if necessary despite having a slightly larger stake in the project than a 50 % stake. If not, the company would pivot to other markets, including Europe, which just hiked tariffs on electric vehicles imported from China.
He said in an interview before the US finalized its rules,” To ride the wave of the IRA, you have to execute fast and comply with its regulations.” We have the flexibility to adapt to all interpretation or rule changes.
At least three joint ventures and several that make reference to Morocco’s trade ties with the United States are included in the Chinese battery projects.
The largest of them is Chinese-German battery manufacturer Gotion High-Tech, which signed a deal with Morocco last year for a USD 6.4 billion investment to build Africa’s first battery factory for electric vehicles.
Investments also include Youshan, a joint venture backed by Korean giant LG Chem and China’s Huayou Cobalt. The Morocco base means their cathodes” will be supplied to the North American market and subsidised by the US Inflation Reduction Act,” it said, declining to provide details about the size of their investment.
LG Chem promised to make necessary ownership adjustments to the company’s shares in order to abide by US regulations.
In its April announcement about a cathode factory, China’s BTR Group stated that Morocco’s trade status with the United States and Europe would result in” a seamless entry for the majority of its manufactured products into these regions.”
Morocco is profiting from its “ability to coexist when a link ca n’t be found between China and the United States,” according to Abdelmonim Amachraa, a supply chain expert who previously worked in Morocco’s Ministry of Industry and Trade.
Officials in Morocco have publicly and privately worked to strengthen ties between the East and the West of the automotive supply chain. 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 automotive industry exports nearly USD 14 billion annually in parts and cars.
Morocco may emerge as a surprise winner as China, the United States, and Europe compete for market share as the world transitions to electric vehicles. However, its officials are concerned that anti-competitive measures like tariffs and subsidies could ultimately make it harder to attract investment.
Ryad Mezzour, the country’s minister of industry and trade, said in an interview that all the new investment does n’t tell the full story. He attributed what he called” a new age of protectionism” to Morocco, which has also affected some projects.
A giant loophole
Countries like Morocco have benefited from the investment. 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”, US Rep. Jason Smith, a Missouri Republican, said of the new guidelines.
However, the complexity of both the supply chain for electric vehicles and the Inflation Reduction Act, which aims to promote domestic manufacturing and encourage adoption of EVs, are at issue.
Working to reduce reliance on Chinese manufacturers while ensuring that enough vehicles are eligible for the credits, the US Energy and Treasury departments have attempted to strike a delicate balance.
The Department of Energy did not respond to inquiries about what its regulations for Chinese investments in nations that have free trade agreements with the United States were.
However, a spokesperson said in a statement that the transition to electric vehicles was” an industry-wide, global trend” and that new policies “help the US strengthen its energy security and competitiveness, including outperforming China.”
China has spent years providing subsidies to businesses that produce crucial battery minerals, cathode, anode, and electrolyzer manufacturers, as well as carmakers like BYD.
According to Chris Berry, an expert to battery companies and investors, decoupling Chinese manufacturers from the supply chain will take years, if not decades, given those companies ‘ eagerness to invest in Morocco to cash in on the Inflation Reduction Act.
Berry claimed that there wo n’t be a lithium ion battery supply chain that wo n’t have Chinese influence for a while.
