CATL and Ford are considering jointly building a US factory for LFP batteries. According to an agency report, the production facility will be fully owned by Ford but operated by CATL. This could make the plant eligible for subsidies from the US government under the Inflation Reduction Act.
This is reported by Bloomberg with reference to insiders. This would be a solution after CATL apparently delayed its plans to invest in battery plants in North America.
The reason for the wait-and-see attitude is said to have been fears that new US regulations on battery materials procurement will drive up costs, according to earlier Reuters reports. There is also a political dimension to the site planning: initially, it was said that CATL would postpone the site announcement until September or October this year because of political tensions between the US and China following Nancy Pelosi’s visit to Taiwan. Subsequently, CATL allegedly took exception to the said Inflation Reduction Act (IRA).
CATL would supply battery cells to Ford and BMW, among others, from its North American factory. According to Bloomberg, the aforementioned initiative is now in place with Ford. By remaining under Ford’s ownership, the plant could receive subsidies without requiring a direct financial investment by CATL. Because – as the news agency specifies – “the Chinese government has discouraged CATL from investing there because of political tensions with the US”. The US states of Michigan and Virginia are said to be under discussion as possible locations for Ford’s and CATL’s battery plant in North America; possible alternatives outside the USA are Mexico and Canada. However, nothing has been decided yet.
To date, Ford has secured sufficient battery cells with a total capacity of 60 GWh per year to achieve an annual production rate of 600,000 electric cars by the end of 2023. This official statement dates from this summer. For the target of two million electric cars in 2026, the US carmaker has procured about 70 per cent of the required battery cells, according to statements made at the time. Suppliers are LG Energy Solution and SK On. Since this summer, a deal has also been struck with CATL, the details of which, however, have not been made public.
But: In addition to this deal, Ford and CATL had also signed another memorandum of understanding at that time to explore cooperation for the supply of batteries to Ford markets in China, Europe and North America. In addition, Ford plans to localise 40 GWh of LFP cells in North America from 2026 onwards – which would, after all, fit in with the above plans.
As a reminder, the Inflation Reduction Act requires, among other things, that automakers source 50 per cent of the critical minerals in e-car batteries from North America or US allies by 2024 and 80 per cent by the end of 2026. The rules would increase the cost of manufacturing batteries in the US versus importing battery materials from China.
CATL was not the only one to criticise the battery supply chain conditions recently. Representatives of carmakers such as VW, BMW and Hyundai have also called on US lawmakers to at least change the timeline, according to the Reuters report mentioned above. The tenor is that more time is needed to achieve the required battery procurement targets.
Keyword: CATL & Ford are looking at jointly operating a battery factory