Chinese Companies Expanding to Morocco to Cash In on US EV Subsidies

Chinese companies are eyeing Morocco as a strategic investment hub to capitalize on the United States' (US) electric vehicle (EV) subsidies.

According to the Associated Press, some Chinese firms plan to establish factories in hills near Tangiers and industrial parks near the Atlantic Ocean that produce EV components eligible for tax credits up to $7,500 for US car buyers.

Chinese EV Companies Expanding to Morocco

With new US incentives aimed at bolstering domestic EV production and reducing reliance on Chinese supply chains, Chinese manufacturers are turning to unexpected locations for expansion.

This trend is not confined to Morocco alone. Similar initiatives have been launched in countries with free trade agreements with the US, such as South Korea and Mexico. However, Morocco stands out with a notable surge in investment activity.

Since the enactment of President Joe Biden's Inflation Reduction Act, a sweeping $430 billion legislation aimed at combatting climate change, at least eight Chinese battery manufacturers have announced substantial investments in the North African nation, according to an AP tally.

This move aims to take advantage of increased demand from American automakers such as Tesla and General Motors. Kevin Shang, a senior battery analyst at the Wood Mackenzie consulting firm, told AP about the strategic importance of this shift, underscoring Chinese firms' determination to participate in the growing market for EV components.

Regulatory Challenges, Strategic Responses in the EV Industry

Since May, the United States and the European Union (EU) have imposed significant tariffs on Chinese vehicle imports. Additionally, the US has finalized eligibility criteria for tax credits, restricting companies with connections to US adversaries.

These rules allow automakers time to reduce their dependence on Chinese suppliers. To qualify for subsidies, carmakers must ensure that critical minerals and battery components are not sourced from entities where China or other designated foreign entities hold more than 25% control over the company or its board.

Critics argue that the regulations favor China and could further entrench its dominance in the electric vehicle market. In contrast, the Biden administration contends that these regulations will stimulate substantial investment in EV manufacturing across the US.

Morocco emerges as an unexpected but strategic player in the global electric vehicle supply chain, attracting significant investment from Chinese firms aiming to capitalize on US subsidies. This shift reflects broader efforts by manufacturers to diversify and secure their positions amid evolving trade dynamics and regulatory changes.

The outcome remains uncertain, with critics cautioning about unintended consequences while proponents foresee a boost to American industry. Ultimately, Morocco's role underscores the complex interplay between global trade policies, environmental goals, and the competitive landscape of the electric vehicle sector.