Ford Motor on Monday announced plans to invest $3.5 billion to build an electric vehicle battery plant in Michigan, betting that making the batteries in the United States will help and that Chinese partner CATL will entice U.S. customers to adopt a lower-cost technology pioneered in China.
Ford’s plan to build the battery plant near Marshall, Michigan, is based on a judgment that lower cost and faster charging will attract many customersincluding commercial fleet buyers, to accept the limitations of lithium-iron-phosphate or LFP batteries.
Ford is also counting on its decision to manufacture LFP batteries in the United States at the wholly-owned plant to eliminate the political risk of relying on a Chinese technology partner.
Building LFP batteries in Michigan also gives Ford a chance to secure major U.S. battery manufacturing subsidies that could help it reach a target of 8% profit margins on its EV operations by 2026.
The BlueOval Battery Park Michigan project is a “substantial step on the road to affordability and a path to 8% margins,” Ford Vice President Lisa Drake said on a media call Monday.
Ford announced plans last year to start using China-made LFP batteries from CATL in select Mustang Mach-E electric SUVs and Ford F-150 Lightning pickup trucks offered in North America and Europe.
Ford studied the driving habits of Mach-E and Lightning owners, and found that half of Mach-Es travel 32 miles or less per day, said Marin Gjaja, chief customer officer for electric vehicle operations. from Ford.
Since then, diplomatic tensions between the United States and China have escalated. In addition, Congress passed the Inflation Reduction Actknown as the IRA, which ties a significant portion of federal subsidies to domestic production and raw material content.
Drake said the IRA “was hugely important” in Ford’s decision to locate its fourth battery plant and 2,500 jobs in Michigan. Michigan Economic Development Corp. Josh Hundt said Ford jobs at the plant would pay between $20 and $50 an hour.
The Marshall plant is expected to start with a capacity of 35 gigawatt hours — enough for 400,000 electric vehicles a year — with production expected to start in 2026. The site has room for expansion, Drake said.
The Marshall plant is one of four battery plants Ford has so far announced plans to build in North America and Europe.
CATL would license technology to Ford to produce lithium iron phosphate batteries in Michigan and provide technical assistance to the US automaker, Ford said.
Last year, Ford agreed to form a joint venture with South Korean battery maker SK Innovation to build Electric Vehicle Battery Plants in Tennessee and Kentucky.
The automaker aims to build 600,000 electric vehicles a year by the end of 2023.
Automakers and electric vehicle battery producers are rushing to set up shop in the United States to take advantage of federal subsidies that could generate up to $45 per kilowatt hour (kWh) to offset production costs.
U.S. battery production subsidies could be more lucrative for automakers and battery makers than Washington’s consumer subsidies for electric vehicle purchases. The IRA ties consumer subsidies to income, vehicle price and local content limits that could make many electric vehicles ineligible.
Michigan was competing with many states and countries for the plant, Ford economic development director Gabby Bruno said. Michigan’s Strategic Fund on Monday approved up to $210 million in grants for the project along with other incentives.