On November 22nd, according to the Nikkei Chinese website, Ford Motor will resume construction of an electric vehicle battery factory in Michigan, USA after a two-month suspension, but the production scale will be reduced by 40% compared to the original plan. After the signing of the Inflation Reduction Act, the protectionist tone towards the domestic industrial chain in the United States has become increasingly strong, and Ford's previous plan to seek technical support from Ningde Times for this factory has been criticized.
In February of this year, Ford announced a partnership with Ningde Times to build an electric vehicle battery factory in Marshall, Michigan, to produce new types of lithium iron phosphate batteries. The battery factory will operate as a wholly-owned subsidiary of Ford Motor, and Ningde Times is only responsible for providing battery patent technology licenses and dispatching relevant personnel for support.
However, this emphasis on "Made in the United States" cooperation approach still leaves strong Republican lawmakers dissatisfied with China, citing the presence of influence from China in the supply chain of pure electric vehicles under this model.
In its latest statement, Ford stated that it will reduce its production scale from 35 gigawatts per year to 20 gigawatts per hour. Based on this, the number of electric vehicles that the factory can supply will be reduced from 400000 to 230000 per year, and the number of employees will also be significantly reduced. Ford explained that the scale reduction is mainly due to the slower than expected popularity of pure electric vehicles in the United States.
The shrinkage of the Michigan battery factory is just a microcosm of Ford's troubles with electric transformation. Due to unsuccessful labor negotiations with unions and a slowdown in consumer demand for pure electric vehicles, Ford announced in October that it would withdraw or postpone investments related to pure electric vehicles totaling up to $12 billion, leading to a contraction in production capacity and recruitment plans.
Ford's projects with several battery partners stalled. In the middle of November, Ford and Korean battery manufacturer LG Energy cancelled the plan to build a joint venture battery production base in Türkiye. The American automobile manufacturer also decided to postpone the construction of the second power battery factory in Kentucky with another Korean battery giant SK ON.
In the third quarter of this year, Ford Model e, Ford's electric vehicle business unit, suffered an operating loss of $1.3 billion, doubling from the same period last year. According to Ford's previous guidance, the annual operating loss of the Model e business unit is expected to be $4.5 billion.
Ford hopes to introduce lower cost lithium iron phosphate battery technology to enhance the profitability of electric vehicles, thereby achieving the target of an adjusted pre interest and tax profit margin of 8% for relevant business departments by 2026. Japanese and Korean companies, mainly based on ternary lithium batteries, are not proficient in the research and development of lithium iron phosphate batteries. Chinese battery manufacturers, which emphasize both technological routes and have a wider coverage, have entered Ford's vision.
How to reduce the price of electric vehicles is an important proposition for multiple multinational car companies, including Ford, to seize market share. A survey released by S&P Global Mobility shows that the average price of electric vehicles exceeding $50000 has deterred potential buyers.
Joining forces with Ningde Times to launch more affordable products is of great significance for Ford to open up the global market. This may be the reason why Ford chose to take the lead in restarting its Michigan battery factory despite continuing to reduce its electric vehicle business expenses. Ford stated that by reducing its dependence on rare metal raw materials, the lithium iron phosphate solution will bring up to 10 to 15% material cost reduction space.
Long before the implementation of technical authorization, Ford had plans to promote the launch of Ningde Era's lithium iron phosphate battery products. Ford will provide Ningde Era's choice of lithium iron phosphate battery packs for Mustang Mach-E and F-150 Lightning pure electric pickup trucks in the North American market this year and 2024, respectively, further boosting the attractiveness of best-selling products.