Gigafactory: Does Moroccan ambition remain possible?

Gigafactory: Does Moroccan ambition remain possible?

The announcement of the construction by Chinese CATL of a gigafactory of batteries for electric vehicles in Hungary a failure of Morocco’s candidacy to host this project? Impossible to know without knowing behind the scenes and especially the details of what Hungary offered to attract the Chinese operator.

On the other hand, this announcement does not necessarily signal the end of Moroccan ambition in this market of the future. Here is what we know and what we should remember from the available public data.

First of all, the production capacity of the future Hungarian plant, announced at 100 GWh, is much higher than the 16 GWh mentioned by the Minister in the interview granted to Medias24. Above all, the batteries which will come out of it will be intended for four automobile manufacturers which already have an industrial structure in Hungary: BMW, Stellantis (via Opel), the Volkswagen group (via Audi) and Mercedes-Benz. Better, the latter launched last July a billion euro investment program within its Hungarian factory, in order to produce a whole range of new 100% electric models.

Producing batteries in Morocco to supply facilities in Hungary would have been heresy for CATL and its customers, given the additional cost that such a choice would cause in the supply chain.

Morocco, always well placed for its gigafactories projects

If the Chinese operator is no longer interested in Morocco, the latter is currently in negotiation with other investors including builders or manufacturers which can be among the leaders of the sector (see table of the ranking of producers during the first half of 2022).

The chances of hosting a battery factory for electric vehicles, or even for renewable energies as well, remain. These ultimately depend advantages that the government is ready to grant to the potential investor, but also and above all Intrinsic assets that an establishment would offer in Morocco.

Rely on the presence of Renault and Stellantis groups

First, figure the industrial presence of two major manufacturers, with substantial capacity (nearly 700,000 units)which Morocco aims to bring to one million units in 2025and whose essentials of production are intended for the European automotive market, itself cornered by its new regulation with rapid electrification.

In effect, Both Renault Group and Stellantis cannot afford to do without partial and then total electrification of their “made in Morocco” models., especially since the latter (Peugeot 208 and Dacia Sandero) are currently in the Top 3 bestsellers in Europe. As a result, a battery manufacturer would have every interest in setting up in Morocco to capture the supply of one or both manufacturers.

Prancing at the top of sales in European markets, the Dacia Sandero is a great success for Renault Group, if not a cash cow. And most of the volumes sold in the Old Continent are produced in Morocco, in the Tangier factory.

This model currently exists only with thermal engines, but it will soon pass the milestone of hybridization (light then complete), and repeatedly, the leaders of the manufacturer assured that the Moroccan site is able to produce these electrified versions.

If it is supposed to occur later than with other brands, total electrification will inevitably arrive at Dacia, otherwise its models could not (eventually) access the European market. This transition has also started with Spring, and will continue in the coming years for the other flagship models of the brand (Sandero and Duster).

Morocco is doubly affected by this development. First, the production of an electric Sandero, which cannot be transferred elsewhere for obvious cost reasons, will have to rely on local or regional sourcing for its batteries.

Next, the Tangier plant is a candidate to welcome the next generation of the Spring, the current being produced in China by partner Dongfeng. And for good reason, Renault Group withdrew from its joint venture with the Chinese manufacturer at the end of 2020, and could relocate production of the electric mini-city car (expected in 2024) to its Moroccan factory. Whatever the option chosen by the French group, the presence of a battery factory in Morocco would be at least advantageous, if not necessary.

The case of Stellantis is significantly different. The Franco-Italian-American group already produces an electric vehicle in its Moroccan factory, in this case the Citroën AMI (also rebadged Opel Rocks-e, and soon Fiat Topolino). However, it is a quadricycle for strictly urban use, reduced technological content and limited production volumes (a maximum of 20,000 units per year). It cannot therefore be considered as the starting point for the development of a real line of electric cars in the Kenitra unit.

However, things could change in the medium term. In less than a year, on the occasion of its facelift, it is a question that the entire production of the Peugeot 208 with thermal engines is transferred to Morocco. And as the majority of this production is intended for Europe, the electric turn will impose itself more sooner or later.

Moreover, Stellantis’ strategic plan “Dare Forward 2030” insists on accelerating the electrification of the group’s brands, with 75 new electric models launched by 2030. And its boss Carlos Tavares specified that all the group’s factories will have to accommodate 100% electric models by 2024. It is therefore not excluded that the Kenitra site integrates in the future other BEV (Battery Electric vehicle) models, including the next generation of the Citroën C3.

And for good reason, the latter will be more subject to the imperative of costs than the current one, in order to play the role of electric access model within the Stellantis offer. Here too, the presence in Morocco of a battery factory would be perfectly synchronous with the group’s industrial strategy.

Geographical proximity to Europe

The production of batteries for electric vehicles is now highly concentrated on the Asian continent, and especially in China, which accounts for nearly 74% of world production. In the wake of the semiconductor crisis, which has highlighted the extreme dependence of European carmakers on Asian manufacturers for their supply, the European Union has decided to make the production of batteries for EV a question of a strategic order, not hesitating to speak of an industrial sovereignty to be recovered.

Thus, with the financial support of the EU, many investments have been announced by various European operators and manufacturers. However, this effort will have to be continued even more intensively in the coming years, in order to increase the proportion of batteries for electric vehicles produced by European companies, a proportion which is currently around 4%.

Due to its geographical proximity, Morocco undoubtedly has a card to play in the choice of locations for battery factories run by European companies. Indeed, a significant part of the European automotive industry is located in southern Europe, and the supply chain, essential in the case of electric vehicles, would constitute a real advantage for the Morocco destination. The choice of an installation in the kingdom would be all the more consistent with the industrial policy of the EU since the two car manufacturers present there, Renault Group and Stellantis, display European passports.

All of the above is centered around mobile batteries, intended for motor vehicles. However, Morocco is also a country of renewable energies and this is an additional asset. Because as a producer of renewable energies, it needs so-called stationary batteries to store the energy produced by solar or wind power. A significant additional outlet in view of the Moroccan strategy in this area.

The issue of raw materials

The installation of a battery production plant also depends on the sources of supply of raw materials and their geographic location. The fact that the Moroccan subsoil is full of the minerals used in the production of these batteries (cobalt, copper, fluorite, etc.) is a first advantage, which recently took shape with the signing of a supply contract between Managem and Renault. In addition, as part of its integration into the ZLECAF (African Continental Free Trade Area), Morocco has tariff advantages with countries producing other materials necessary for the production of batteries (including lithium and bauxite), and Moroccan companies even operate mines in African countries.

Here again, the geographic proximity card is added to this, and the savings they can generate, at the level of the logistics chain, for a manufacturer.

Put together, all these factors are as many arguments that Morocco puts forward, and that international operators know more or less about, in order to convince a major manufacturer of batteries for electric vehicles to set up its production lines in the kingdom. It would be difficult for Morocco not to obtain its gigafactory.

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