Ford Motor on Monday announced plans to speculate $3.5 billion to construct an electrical vehicle battery plant in Michigan, betting that making the batteries in america will help and Chinese partner CATL attract US customers to embrace a lower-cost technology pioneered in China.
Ford’s plan to construct the battery plant near Marshall, Mich., hinges on a judgment that lower cost and faster recharging will attract many purchasers, including industrial fleet buyers, to accept the restrictions of lithium-iron-phosphate, or LFP batteries.
Ford is also counting on its decision to fabricate LFP batteries within the US on the wholly owned plant to take the political risk out of counting on a Chinese technology partner.
Constructing LFP batteries in Michigan also gives Ford a shot at significant US battery manufacturing subsidies that would help it hit a goal of 8% profit margins on its EV operations by 2026.
The BlueOval Battery Park Michigan project is a “substantial step in the trail to affordability and the trail to eight%” margins, Ford Vice President Lisa Drake said on Monday during a media call.
Ford announced plans last 12 months to start using LFP batteries made in China by CATL in certain Mustang Mach-E electric SUVs and the Ford F-150 Lightning pickups offered in North America and Europe.
Ford has studied the driving habits of Mach-E and Lightning owners, and located half of Mach-Es are driven 32 miles or fewer a day, said Marin Gjaja, chief customer officer for Ford’s electric vehicle operations.
Since then, diplomatic tensions between america and China have escalated. Also, Congress passed the Inflation Reduction Act, referred to as the IRA, which ties a big share of federal subsidies to domestic production and raw materials content.
Drake said the IRA “was incredibly vital” to Ford’s decision to locate its fourth battery plant and its 2,500 jobs in Michigan. Michigan Economic Development Corp. official Josh Hundt said the Ford jobs on the plant can pay $20 to $50 an hour.
The Marshall plant is scheduled to launch with 35 gigawatt-hours of capability – enough for 400,000 EVs a 12 months – and production should start in 2026. The location has room for expansion, Drake said.
The Marshall factory is one in every of 4 battery plants Ford plans has to date announced plans to construct in North America and Europe.
CATL would license technology to Ford to provide lithium iron phosphate batteries in Michigan, and would supply the US automaker with technical assistance, Ford said.
Ford last 12 months agreed to form a three way partnership with South Korean battery maker SK Innovation to construct EV battery factories in Tennessee and Kentucky.
The automaker has a goal of constructing 600,000 EVs a 12 months by the top of 2023.
Automakers and EV battery producers are racing to establish manufacturing in america to reap the benefits of federal subsidies that would generate as much as $45 per kilowatt hour (kWh) to offset the prices of production.
The subsidies for US battery production might be more lucrative for automakers and battery makers than Washington’s consumer subsidies for EV purchases. The IRA ties consumer subsidies to income, vehicle price and native content limits that would make many EVs ineligible.
Michigan competed against quite a few states and countries for the plant, said Ford economic development director Gabby Bruno. The Michigan Strategic Fund on Monday approved as much as $210 million in grants for the project together with other incentives.
