Chinese battery investment concentrated in 8 Moroccan areas Korea ‘excluded’ in the face of U.S. subsidies
As Chinese battery investment is concentrated in Morocco in North Africa, Korea's share is decreasing as it becomes a new confrontation site for U.S. subsidies.
Chinese manufacturers have begun investing in an unexpected place: Morocco, as the United States moves to boost domestic electric vehicle production and implement a new subsidy system designed to reduce China's supply chain dominance.
China has been providing subsidies for years to companies extracting key minerals for batteries, manufacturers of cathode materials, cathode materials, electrolyzers, and automobile manufacturers such as BYD, and these companies have invested in Morocco through the U.S. Inflation Reduction Act (IRA) to reduce Chinese manufacturers. AP reported on the 2nd that a long-term strategy to separate from the supply chain has begun.
Commenting on the strategy, Chris Berry, an advisor to battery companies and investors, told The Associated Press that "there will be no lithium-ion battery supply chain that will not be influenced by China for a long time," possibly decades.
China, which has taken control of the electric vehicle transition trend between a complex U.S. subsidy system and free trade agreements, can get American car buyers a $7,500 credit in an industrial complex near the Atlantic Ocean and rolling hills near Tangier, Morocco. AP reported that the company announced plans for a new factory to make parts for electric vehicles (EVs).
AP said, “Similar investments have been announced in other countries that have free trade agreements (FTAs) with the United States, such as Korea and Mexico, but few countries are enjoying a boom like Morocco,” and based on its own count, “President Biden has "At least eight Chinese battery manufacturers have announced new investments in the North African kingdom following the signing of the $430 billion US Inflation Reduction Act (IRA), designed to address the changes," it said.
“Chinese companies that have long dominated the battery supply chain are shifting operations to U.S. trading partners such as Morocco, thereby reducing the cost of American automakers such as Tesla and General Motors,” said Kevin Shang, senior battery analyst at consulting firm Wood Mackenzie. “We are looking for ways to cash in on the growing demand from manufacturers,” he told AP. “Morocco is preparing for the era of electric vehicles and Chinese companies do not want to miss this big party.”
Morocco's northern countryside, at the mouth of the Mediterranean in southern Europe, has no passenger-carrying trains at ports in the Mediterranean, and ships transport hundreds of cars three times a day from the Renault plant outside Tangier, stacked bumper-to-bumper, to European dealerships, AP said. reported on May 16th last month.
Through corporate incentives and investment in infrastructure such as freight rail lines, Morocco grew its virtually non-existent and unimaginable automobile industry into the largest in Africa in less than 20 years.
The Kingdom of Morocco now supplies more cars to Europe than China, India or Japan and has the capacity to produce 700,000 vehicles per year.
Moroccan officials are determined to maintain Morocco's role as a car manufacturing giant by competing for electric vehicle projects, helping one of Africa's few industrialization success stories remain competitive as global car production shifts to EVs and trends toward automation. I'm trying to decide if it will happen.
The Associated Press said Morocco currently operates more than 250 companies manufacturing cars or parts, and Morocco's automotive industry is now rapidly growing, accounting for 22% of gross domestic product and accounting for $14 billion in exports.
In the first place, French automaker Renault, the largest private employer in Morocco, calls Morocco "Sandero land" because it was the production base for almost all compact Dacia Sanderos and now has an agricultural economy with a median income of $2,150 per month. The rural outskirts of Tangier, Kenitra and El Jadida have been transformed into huge industrial parks filled with American, European and Chinese component manufacturers.
CNGR, one of China's largest battery cathode material producers, in September formed a joint venture with Al Mada, the investment group of the Moroccan royal family, in a $2 billion plan to build a "global and trans-Atlantic base." announced.
China owns a little over 50% of the CNGR project and is targeting US electric vehicle subsidies.
“We are confident that our cathode materials will be tax deductible and that we can change our board composition if necessary,” said Thorsten Lahrs, CEO of our European operations. “We must execute quickly and remain compliant if we are to ride the IRA wave. “We have the flexibility to comply with any changes in interpretation or rules,” he told the AP.
“Otherwise, China will turn to other markets, including Europe, which has raised tariffs on electric vehicles imported from China,” he said, AP quoted him as saying, citing at least three joint ventures in Chinese battery projects and trade ties between Morocco and the United States. It said it includes several joint ventures.
The largest Chinese investment is Gotion High-Tech, a Chinese-German battery manufacturer that last year signed a deal with Morocco to invest $6.4 billion to build Africa's first electric vehicle battery factory.
Yusan, a joint venture between South Korea's LG Chem and China's Huayou Cobalt, also invested in Morocco, and AP said of this investment, "Because Morocco signed the U.S. Free Trade Agreement (FTA), it will supply to the North American market and increase inflation in the U.S." “We will receive subsidies under the IRA,” he said.
LG Chem told the AP that it would adjust its ownership stake as necessary to comply with U.S. regulations.
When China's BTR Group announced construction of a cathode materials plant in April, it told The Associated Press that Morocco's trade with the U.S. and Europe "will allow most manufactured products to enter the region seamlessly."
Abdelmonim Amachraa, a supply chain expert who worked at Morocco's Ministry of Industry and Trade, told The Associated Press that Morocco "is benefiting from the ability to coexist when the link between China and the United States cannot be found."
Officials in Morocco have been working publicly and privately to strengthen ties up and down the automotive supply chain in the East and West, with more than 250 companies that make cars or their parts, including Stellantis and Renault, as well as seats, engines, shock absorbers and wheels. There are factories in China, Japan, the United States, and Korea that make it, and the auto industry has grown to export cars and parts worth $14 billion annually.
Regarding investment in Morocco, he said, “Washington has raised alarm bells as Chinese companies are struggling to receive subsidies from the U.S.” “It is,” he said.
AP said, “The U.S. Department of Energy and Treasury have been trying to strike a delicate balance by reducing reliance on Chinese manufacturers while ensuring that enough vehicles qualify for the tax credit. “It did not answer questions about what restrictions on Chinese investment in the field mean,” he said.
China's Morocco strategy appears to have excluded Korea's role as leverage in responding to the blockade of the U.S. supply chain.