Manufacturing Chinese cash to supercharge Morocco’s EV battery sector By Melissa Hancock October 10, 2023, 11:57 AM Reuters/Satoshi Sugiyama Workers at a Mitsubishi factory in Japan install an EV battery. Morocco has 70% of the world's phosphate, a vital material for batteries Plans for two factories unveiled Morocco tipped as ‘investment hotspot’ US laws hamper Chinese businesses Morocco’s plan to become a centre for electric vehicle manufacturing has received a boost from two Chinese companies, as the kingdom benefits from the cooling relations between Beijing and Washington. CNGR Advanced Material, a Chinese manufacturer of battery components, announced last month that it would join forces with Al Mada, a conglomerate owned by the Moroccan royal family, to invest MAD20 billion ($2 billion) in construction of a cathode materials plant. Also in September, China’s Zhejiang Huayou Cobalt and South Korean chemical maker LG Chem revealed they were teaming up to build a lithium refinery and cathode materials plant in Morocco. Renault’s hybrid move will power up Morocco’s EV ambitions Dubai company’s EVs aim to deliver ‘last mile’ in 100 cities Morocco must now tackle cost of World Cup win Construction of the CNGR-Al Mada factory will start this year in Jorf Lasfar, a port on Morocco’s Atlantic coast. Production is set to begin in 2025 and the facility aims to equip more than 1 million electric vehicles (EVs) each year. Exports will be geared towards serving the US and European battery markets. The Zhejiang Huayou Cobalt-LG Chem plant is set to start production in 2026. It aims to produce 50,000 tonnes of lithium-iron-phosphate cathode materials each year – enough to be installed in 500,000 entry-class EVs. Joshua Cobb, senior analyst in the autos team at BMI, formerly Fitch Solutions, told AGBI that China’s fractious trade relationship with the US was forcing manufacturers to invest elsewhere. “Chinese companies have always been willing to take risks, but these days, US policy and geopolitical risk is becoming a bit too much for them,” Cobb said. “Combined with the fact that Morocco offers a favourable operating environment in terms of permit laws, I think it’s going to emerge as one of the main investment hotspots.” Morocco is also home to 70 percent of the world’s reserves of phosphate, a key material in the cheaper, lower-range batteries produced primarily by Chinese companies. LG Chem has said the cathodes produced at its Morocco plant will be supplied to the North American market and could be eligible for subsidies under the US Inflation Reduction Act of 2022, because Morocco and the United States are free trade partners. Under the Inflation Reduction Act, at least 40 percent of the value of critical minerals used in an EV’s battery must be sourced from the US or one of its free trade partners in order to qualify for a $3,750 tax credit. In this way, Morocco serves as a convenient launchpad from which Chinese companies can supply Western markets and benefit from the tax credits. In April this year, the Inflation Reduction Act was revised in order to penalise cars with components sourced from outside the US and its trading partners, in a bid to reduce China’s role in the battery supply chain for EVs sold in the US. Kevin Shang, senior battery analyst at energy consultancy Wood Mackenzie, told AGBI that saturation in the Chinese market will also drive more of its battery manufacturers to consider investing in Morocco. “In the next few years, battery supply will start outstripping demand in the Chinese market,” said Shang. “So Chinese companies are now looking to expand elsewhere in order to generate better revenues. “They see the growing opportunities in the US given the Inflation Reduction Act and in Europe owing to its ambitious electrification targets, so they want to tap into these markets. I think Morocco has been on their radar for some time.” Register now: It’s easy and free AGBI registered members can access even more of our unique analysis and perspective on business and economics in the Middle East. Why sign uP Exclusive weekly email from our editor-in-chief Personalised weekly emails for your preferred industry sectors Read and download our insight packed white papers Access to our mobile app Prioritised access to live events Register for free Already registered? Sign in I’ll register later