China's EV players chart course for Morocco amid subsidy squeeze

With increasing restrictions on clean technology imports from China by the US and Europe, Chinese companies seek new manufacturing and export bases to avoid countervailing duties. 

Thailand, for example, is a notable destination, with Chinese carmakers setting up electric vehicle (EV) plants to serve Southeast Asia and other markets. These carmakers have made inroads into a domestic market traditionally dominated by Japanese brands like Honda, Toyota, and Nissan.

In Africa, they are setting up ops in Morocco, thanks to its free trade agreement with both the US and Europe, one that allows goods manufactured there to enter both markets without attracting anti-dumping duties or trade-protection tariffs the kind imposed on Chinese-origin goods. These players are making a beeline for the North African kingdom to take advantage of this and bypass import restrictions and tariffs.

Li Changlin, China's ambassador to Morocco, claims his country's investment in the North African nation's EV and new energy sectors has "exploded." 

The Kingdom has "become a new hotspot for Chinese companies to invest overseas," Li said, adding, that "Chinese companies have invested heavily in Morocco's renewable energy, new energy vehicle batteries, and other fields, playing a positive role in promoting its energy transformation and the development of the automotive industry."

Case in point, China is building the Mohammed VI City for Science and Technology, a manufacturing and technology hub, through a group of companies led by China Road and Bridge Corp. 

The Tangier tech hub, another project, will host hundreds of Chinese companies. Coming up at $1 billion, it will be home to battery maker BTR New Material Group, which is setting up a cathode manufacturing facility to the tune of $300 million. Li, who has visited both sites, called the Tangier project "an important symbol of the high-quality joint construction of the 'belt and road' between China and Morocco."

Dancing to the drumbeat

The US and Europe imposed restrictions on Chinese cleantech goods earlier this year. They were concerned that China might dump excess production into their markets and give local players an insurmountable hurdle. 

President Biden introduced new levies on $18 billion worth of Chinese imports in May, including a 100 percent tax on imported Chinese EVs, a 50 percent tax on Chinese solar cells, and a tripling of the tariff on lithium-ion batteries for EVs and lithium batteries meant for other uses. 

Washington, D.C. said the new levies are necessary to protect its domestic industries from unfair competition, an official stating, "China is producing at a rate and with a trajectory that's far in excess of any plausible estimate of global demand," adding, "That is going to flood the global market with supply that undercuts our ability to build productive capacity at home and leaves all of us across the world more vulnerable to economic coercion."

The European Union followed closely, raising tariffs on Chinese EVs to protect the continent's auto industry. The bloc imposed different duties, peaking at 38.1 percent, to protect the bloc's auto industry from "market-distorting subsidies" from the Chinese government.

In addition to bypassing duties, setting up manufacturing facilities in Morocco offers Chinese companies another benefit: tax breaks. Goods made here qualify for incentives under the US Inflation Reduction Act 2022 (IRA), aimed at boosting the country's cleantech capabilities. 

The IRA, with a $430 billion chest, gives tax credits to American consumers who buy EVs rather than conventional, fossil-fuel-powered vehicles. Morocco's free-trade deal with the EU allows Chinese companies to bypass tariffs from the trade bloc.

Among the investments attracted so far is a $1.3 billion gigafactory move from Chinese battery maker Gotion, set to begin production in the third quarter of 2026 with a capacity of 20 GWh per year. 

CNGR Advanced Material, a battery parts maker from the Middle Kingdom, has joined hands with Moroccan private investment fund Al Mada to build a $2 billion industrial base. Youshan, a subsidiary of China's biggest cobalt refiner Huayou, is linked up with South Korea's LG Chem to set up a lithium-iron-phosphate (LFP) cathode materials plant.

Well, Morocco is already a major car manufacturing hub for large European carmakers including Stellantis and Renault. Official data show the auto industry accounts for around a fifth of its GDP, and last year exported about $13.9 billion worth of passenger vehicles. 

Per Material Insights, Morocco holds around 70% of the world's known phosphate rock reserves, crucial for producing battery materials. 

The government wants to harness the country’s natural resources and strategic location to boost its manufacturing sector. It aims to become a key player in global battery minerals production and processing transformation, with major EV battery plants already announced. 

In March 2024, it established its first industrial zone dedicated to EV battery production, the Jorf Industrial Accelerator Zone, with initial investments totaling $2.3 billion. The 283-hectare industrial zone is expected to create 4,000 jobs and attract investments from companies like Chinese firm CNGR and Moroccan-based African private investment fund Al Mada.

Mining deals apace

In July 2024, Critical Mineral Resources (CMR), a UK-based mining company, signed an exclusive option to acquire the Igli project, a high-grade silver and copper venture located in the Anti-Atlas region of Morocco.

CMR says the Igli project has yielded promising results with grades of up to 912 grams per tonne of silver and 2.97% copper. 

In the same month, Genius Metals, a Canadian exploration company, said it had entered into an option agreement with Société Bleida Mineral Resources to acquire a 100% interest in the BMR copper-gold prospect project.

Morocco’s vast phosphate reserves, strategic access to global markets via the Mediterranean and Atlantic, abundant solar power, and skilled workforce position it well to become a high-tech battery cell manufacturer.

With the right vision and government effort, the North African nation stands a good chance to become a major player in global green technology.