Ford Motor has announced a reduction in investment, capacity, and job numbers for its electric-vehicle (EV) battery plant in Michigan, which faced criticism for its collaboration with Chinese battery maker CATL. The project, initially paused two months ago, is set to resume near Marshall, Michigan. Ford aims to produce low-cost lithium-iron batteries by 2026, based on technology licensed from CATL. The decision to scale back is seen as a response to concerns from U.S. lawmakers opposing EV subsidies benefiting a Chinese entity.
Resuming construction with adjusted plans
Ford is restarting the construction of the Michigan factory but with notable adjustments to its initial plans. Originally slated to spend USD 3.5 billion, the Blue Oval Battery Park Michigan will now have reduced capacity – from 35 gigawatt hours to 20 gigawatt hours annually. The number of jobs will also be trimmed, down from 2,500 to 1,700 positions.
Controversial partnership with CATL
The collaboration between Ford and CATL has faced scrutiny, with U.S. lawmakers expressing disappointment over EV subsidies potentially benefiting a Chinese company. Representative Mike Gallagher emphasized the need for ethical decisions, stating that “Ford needs to call off this unethical deal for good.” The controversy surrounds the flow of American taxpayer subsidies to a Chinese entity.
Push for treasury approval and IRA benefits
Ford is advocating for the U.S. Treasury Department to approve lithium-iron (LFP) batteries made at the Michigan plant to qualify for Inflation Reduction Act (IRA) EV subsidies. The company remains confident about IRA benefits and defends its use of LFP batteries in the Mustang Mach-E electric SUV.
Industry trends and market response
The decision to scale back aligns with broader industry trends, with General Motors also slowing down EV investment amidst rising interest rates affecting demand. Ford’s move contributed to a 1.5% drop in its shares, while GM and Stellantis fell by 2.2% and 2.1%, respectively, in New York trading.
Labor costs and overall EV investment adjustment
The Detroit Three automakers, including Ford, are grappling with increased labor costs following ratified contracts with the United Auto Workers. Ford’s capital investment will be proportionally reduced, aligning with the 40% cut in capacity. This adjustment indicates a revised investment figure of approximately $2 billion. In October, Ford had already announced a $12 billion cut in future EV investments compared to previous plans, postponing the construction of battery factories in Kentucky and Turkey.
The scaled-back plans reflect a strategic response to challenges and controversies, balancing market dynamics and the need to navigate political and economic considerations in the evolving landscape of electric vehicles.