Ford is Reportedly Working on a $3.5 Billion Battery Plant in Michigan

Ford has been at the forefront of electric vehicles. In the U.S., Ford Motor Co. experienced a significant surge in electric vehicle sales last year, doubling its sales figures and solidifying its position as the second-largest player in the EV market after Tesla, Inc.

With the introduction of its F-150 Lightning plug-in pickup and E-Transit van, the Dearborn, Michigan-based automaker managed to sell 61,575 EVs in 2022, representing a remarkable growth of 126%. Ideally, Ford’s project on a $3.5 billion battery plant in Michigan will completely revolutionize the EV market.

Its top-in-line EVs, such as Mustang Mach-E, the F-150 Lightning pickup, and the E-Transit van, deliver high performance and functionality for all users. Ford is taking things a notch higher in this respect as the world gears toward sustainable energy. The proposed plan to build a $3.5 billion battery plant aims to boost the electric vehicles market by making lower-cost batteries for various new and existing electric vehicles.

Let’s discuss below what we know so far about the plans for the battery plant.

Inside the Ford $3.5 Billion Battery Plant in Michigan

Ford’s planned factory, located near Marshall, is set to manufacture batteries utilizing lithium-iron-phosphate (LFP) chemistry. This is a more cost-effective alternative to the current nickel-cobalt-manganese chemistry employed in many electric vehicles (EV) batteries.

This development will allow consumers to select between a battery with lower cost and range or pay more for a battery with greater range and power. However, the company still needs to release pricing information. Marin Gjaja, the Chief Marketing Officer for Ford’s electric vehicles, stated that the main goal is to make electric vehicles more accessible and affordable for customers.

Optimizing U.S. Tax Credits for Businesses to Create a U.S. Supply Chain for EV Batteries

A wholly-owned subsidiary of Ford will own and operate a new factory producing lithium-iron-phosphate (LFP) batteries for electric vehicles, Ford announces. The same subsidiary will also be responsible for employing the workers at the factory. However, China’s Contemporary Amperex Technology Co. Limited (CATL), renowned for its LFP expertise, will supply equipment, technology, and workers.

The announcement comes amidst strained U.S.-China relations and as the Biden administration offers tax credits to businesses to establish a domestic EV battery supply chain. The EV batteries must not contain metals or components from China to receive the full $7,500 package per vehicle tax credit. Ford’s arrangement with CATL enables the company to benefit from U.S. factory tax credits under the Inflation Reduction Act while avoiding criticism of partnering with a Chinese company.

Initially, buyers will receive at least $3,750 in tax credits for vehicles produced in North America. Marin Gjaja, Chief Marketing Officer for Ford’s electric vehicles, stated they might be eligible for the full $7,500 credit based on sourcing battery minerals over time. Standard-range versions of Ford’s electric cars will use LFP batteries, such as the Mustang Mach-E electric SUV’s lowest-priced model, which will have a range of 247 miles per charge. The long-range version will utilize nickel-cobalt-manganese chemistry, providing a range of 310 miles per charge.

The Importance of Michigan as a Site for the $3.5 Billion Battery Plant

Virginia withdrew from the competition for the Ford plant in January this year, with Governor Glenn Youngkin labeling it a “front” for the Chinese Communist Party, which could raise national security concerns. Ford turned its attention to Michigan, where a 1,900-acre “megasite” in the state’s southwestern region has recently been advertised.

If speculations are accurate, the proposed $3.5 billion battery plant in Michigan will supplement Ford’s $11.4 billion venture with South Korea’s SK Innovation to establish EV and battery factories in Kentucky and Tennessee. This development could aid the company in approaching its target of producing more than 2 million EVs annually by the end of 2026.

According to Ford Motor Co., Executive Chair Bill Ford, the company considered locations inside and outside the U.S. for their new battery plant but ultimately chose Michigan due to the state’s willingness to offer incentives. The Michigan Strategic Outreach and Attraction Reserve Fund (SOAR) provided $210 million to lure the company and its jobs to the state. However, the full size of the incentive package still needs some more clarity.

The SOAR Fund, created in December of 2021 to attract industry and jobs, has received nearly $1.8 billion from the state’s general fund. Ford decided to build the plant in Michigan after an announcement last summer that China’s CATL would make lithium-iron-phosphate battery packs for Ford’s electric SUVs and trucks, with production at the Michigan plant beginning in 2026.

Impacts of the $3.5 Billion Battery Plant on Ford’s Operations and Future Plans

As part of Ford’s $3.5 billion battery plant project, the company anticipates achieving a production capacity of 600,000 electric vehicles annually. According to Whitmer, the new plant will create opportunities for West Michigan families and ensure that global disruptions or shipping delays do not impede production lines.

Lisa Drake, Ford’s Vice President of Industrialization for electric vehicles, explained that, although lithium-iron-phosphate batteries are already used in some competitors’ vehicles and consumer electronics, all batteries are imported. Ford aims to mitigate this by constructing a battery factory in the United States to scale up technology production while controlling the manufacturing process and workforce.

Conrad Layson, a senior analyst with AutoForecast Solutions, suggested that the newly-established battery factory could provide power to multiple Ford models. As Ford expands its lineup of all-electric models, the plant’s output could create lower-cost versions of those future vehicles.

Contribution to the EV Industry and Sustainable Transportation Initiatives

Other car manufacturers have expressed their intentions to increase the utilization of LFP batteries. Despite their lower energy density, which previously made them less attractive to automakers in Europe and North America where driving distance is a significant factor, LFP batteries have become more appealing due to recent improvements in their driving range. Moreover, analysts and executives have stated that LFP-based electric vehicles offer greater durability and reduced fire risk than those using nickel-and-cobalt-based chemistries.

Potential Challenges and Opportunities for Ford in the EV Market

As with any emerging industry, the electric car sector encounters several intertwined challenges, making them difficult to untangle. The primary challenge is the high cost of battery technology which Ford seeks to address with the anticipated $3.5 billion battery plant in Michigan. Depending on their budget, the plant will allow customers to choose the battery range they want.

The cost of producing electric cars is high, causing them to be more expensive than comparable gasoline vehicles, which makes consumers hesitant to embrace them. This creates a paradox where electric vehicles could be cheaper if produced at a higher volume and could take advantage of economies of scale. However, this can only occur once consumers begin to purchase them, which will likely happen with prices coming down.

Ford seeks to unravel the paradox. The massive production plant will take advantage of the economies of scale and be the long-awaited savior, offering low-priced EVs. In addition to cost, electric car manufacturers must also convince consumers that electric cars are a practical choice for their lifestyles. People are worried about how far they can go in electric cars before their batteries die, making range anxiety a major concern. Unlike a gasoline-powered car, where stopping to refuel only takes a few minutes, charging an electric car is more complex.

The 2023 Ford Mustang Mach-E has a range of about 306 miles on a single charge. Obtaining a full charge can take up to eleven hours unless specialized charging stations are available, which currently need to be made available. While most people drive less than 40 miles daily and can quickly charge their electric cars overnight, they still need to be more practical for long road trips. 

Additionally, unexpected situations, such as driving more miles than anticipated daily, can be challenging to handle. These factors create a significant obstacle that the electric car industry must overcome. As Ford gears toward massive EV production, we can anticipate vehicles with improved capabilities, range, and features soon.

Bottom Line

The move towards zero-emission and low-maintenance vehicles is gaining momentum as more manufacturers find innovative ways to produce cost-effective cars. Ford is already ahead with plans to launch a massive EV battery plant in Michigan underway.

Ford expects this $3.5 billion plant in Michigan to create 2,500 jobs in the state and boost the company’s production capacity to 600,000 electric vehicles annually. The company also aims to mitigate the importation of lithium-iron-phosphate by constructing a battery factory in the United States. This will scale up technology production while controlling the manufacturing process and workforce, giving it an edge over its competitors.