Ford is investing $3.5bn in EV battery plant with Chinese firm

Ford Motor is investing $3.5bn in an electric-vehicle battery plant in southwest Michigan that it will operate with technology and support from a Chinese battery maker that has stirred political controversy.

The factory near Marshall, Michigan, will employ 2,500 workers, Ford said Monday, confirming a February 10 Bloomberg report. The facility is set to open in 2026 and will produce enough batteries to power 400,000 EVs a year.

The US automaker will be contracting the battery know-how from China’s Contemporary Amperex Technology, which will help set up the plant and have staff there. Ford said it will own and operate the factory and set up a wholly owned subsidiary to run it.

“Ford has control — control over the manufacturing, control over the production, control over the workforce,” Lisa Drake, Ford’s vice president of EV industrialisation, said in a briefing with reporters. “We’re licensing that technology from CATL.”

The arrangement, aimed at securing tax benefits for the plant, has drawn criticism at a time of heightened geopolitical tension between the US and China. Virginia governor Glenn Youngkin pulled his state from consideration as a location for the factory, calling it a “Trojan horse” for the Chinese Communist Party.

CATL staff will help with the installation of factory equipment to build the batteries, some of which will come from China, Drake said. And some of that personnel from CATL will remain at the Michigan factory permanently because “we need their help,” Drake said.

Today @Ford is announcing a $3.5B investment to build the first automaker-backed LFP battery plant in the U.S. bringing 2,500 jobs to Michigan. Good for America and our customers! All part of our $50B+ plan to innovate & lead the EV revolution. #BuiltForAmerica #BuiltFordProud pic.twitter.com/TgdcRX9jqw

— Jim Farley (@jimfarley98) February 13, 2023

The United Auto Workers said in a statement that it expects the plant to create “good-paying union jobs.”

At a ceremony Monday in Michigan to announce the factory, executive chairman Bill Ford, great-grandson of founder Henry Ford, characterised his company’s relationship with the Chinese battery maker as a way to foster American autonomy in building EV batteries, which now come primarily from Asia.

“Manufacturing these batteries in America will bring us closer to battery independence,” the company said. CATL will “help us get up to speed so we can build these batteries ourselves.”

Ford to begin offering LFP batteries

CATL, the world’s largest battery maker, is providing the technology for lithium iron phosphate batteries, which are less expensive and will make Ford’s EV lineup more affordable, Drake said. The plant will be the first in the US to produce so-called LFP batteries.

Ford will begin offering LFP batteries in its Mustang Mach-E model later this year and in its F-150 Lightning plug-in pickup truck next year. Initially, those batteries will be imported from China. Tesla Inc. and Honda Motor Co. also have contracts with CATL to import LFP batteries for their EV models.

The Michigan factory will have the annual capacity to produce 35 gigawatt hours of LFP batteries, which is enough to provide power sources for 400,000 models a year, Drake said. That will represent about one-fifth of the EV output of two million vehicles Ford is targeting annually by late 2026. The automaker is spending $50bn to develop and build EVs through 2026.

By outfitting so much of its electric lineup with more affordable batteries, that will help the automaker achieve the sales volume it needs to reach its goal of an 8 per cent margin on earnings before interest and taxes on EVs by 2026, Drake said.

Ford’s shares rose 2.4 per cent at 2:26 p.m. in New York. The stock was up 9.5 per cent this year through Friday’s close.

Tax credits

Ford believes the batteries produced at the factory will quality for full production tax credits under the Inflation Reduction Act passed by Congress last year that seeks to encourage domestic production of EVs and batteries.

However, consumers purchasing Ford EVs with the batteries produced at the Michigan plant will not be eligible for the full $7,500 tax credit, according to Marin Gjaja, head of sales and marketing for Ford’s EV business. Rather, they’ll qualify for a $3,750 credit because the vehicle is built in the US, but the battery materials are not locally sourced. Commercial customers and lessors will qualify for the full $7,500 tax credit, Gjaja said.

“I think over time we’ll see if we’ll qualify for the full $7,500 based on the mineral sourcing and that’s something that the team continues to work on,” Gjaja told reporters.

Read: Honda, LG will build $4.4bn EV battery plant