Quiver Quantitative - Ford Motor (NYSE:F) has announced a temporary halt on the construction of its $3.5 billion battery plant in Marshall, Michigan. This facility was poised to manufacture lower-cost battery cells using technology from the Chinese battery giant, Contemporary Amperex Technology. The decision to pause follows extensive scrutiny from U.S. lawmakers, who have expressed concerns about Ford's partnership with CATL, warning of potential Chinese dominance in the American auto sector. While Ford hasn't finalized its investment plans, it seeks assurance in its capability to competitively operate the factory before proceeding.
The factory's intent was to tap into CATL's expertise, leveraging advanced battery chemistry to reduce production costs and meet Ford's ambitious target of producing 2 million EVs globally by 2026. However, amid unpredictable consumer demand, Ford has since revised this target. Lower-cost batteries from this plant are pivotal to Ford's strategy, aiming to reduce the price of EVs for consumers. Such batteries were set to power vehicles like the Mustang Mach-E electric SUV and the F-150 Lightning EV pickup. In a move highlighting the plant's strategic importance, Ford reduced prices on its F-150 Lightning truck by up to $10,000 in July, attributing the decision to decreased material costs.
Politically, Ford's Michigan plant investment has sparked controversies in Washington. Central to the debate is the $7,500 tax credit introduced by the Biden administration for new electric vehicle purchasers. Many Republicans oppose the application of this credit to Ford vehicles powered by batteries with CATL technology, criticizing the White House for indirectly funding Chinese enterprises. The administration continues to fine-tune the subsidy's rules, torn between caution against licensing agreements with Chinese entities and the acknowledgment that Chinese firms often provide cost-effective battery solutions for EVs.
Apart from political challenges, Ford grapples with labor issues. The United Auto Workers (UAW) union, which is currently picketing a Ford plant in Michigan, is negotiating a new labor agreement. As Ford continues its dialogue with the UAW, the automaker is concurrently building battery factories in Tennessee and Kentucky in collaboration with the Korean battery producer, SK On. This partnership recently secured a $9.2 billion loan from the Energy Department, with the new facilities scheduled to start operations in 2025.
This article was originally published on Quiver Quantitative