China is building a battery supply chain for Europe in Morocco, as the continent struggles to develop its own industry to feed electric-car manufacturing, PowerCo’s operations head said.

“We don’t have any supply chain. This has to be set up,” Sebastian Wolf, chief operating officer for Volkswagen AG’s battery unit, said Tuesday at an event in Stuttgart. “Right now, we have to be honest that the set-up of LFP supply chain is happening in Morocco and not in Europe.”

China has a tight grip on global battery making, as well as the raw materials like lithium, nickel and cobalt needed to make them. Europe is trying to build its own supply chain, but is years behind in terms of technology. At the same time, the region is losing investment to the US and Canada, where government financial incentives have been more aggressive.

Lithium iron phosphate batteries are quickly gaining adoption as a less expensive technology that has become more efficient in recent years. China can produce LFP batteries at nearly half the cost of the global average, according to BloombergNEF.

Morocco is rich in phosphate resources, key to making LFP cells. The country is also positioned on the doorstep of Europe and benefits from free-flowing trade with the US.

Last year, CNGR Advanced Material Co., a Chinese maker of battery components, announced it was joining forces with African private investment fund Al Mada to build an industrial base in Morocco. With a total investment of more than $2 billion, they said they aimed to begin output of battery materials at a new site in Jorf Lasfar, on Morocco’s Atlantic coast, in 2025.