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SK On battery factory in Kentucky. Image courtesy of Ford.


Ford Exploring LFP Battery Factory Agreement With CATL

Ford and CATL are close to an agreement to build a battery factory together in America, but whose name will be on the front door?

LG Chem, Panasonic, SK On, Samsung SDI, and several other battery manufacturers are rushing to build battery factories in America, thanks in large part to the Inflation Reduction Act, which provides significant tax advantages for batteries made in the US. But CATL — the largest battery manufacturer in the world — has been on the outside looking in, largely due to the roiling political waters between the US and China ever since Nancy Pelosi visited Taiwan earlier this year. Now Ford says it is considering an agreement with CATL to build a factory either in Michigan or Virginia to manufacture LFP batteries.

The news is being reported by Bloomberg (paywall) but has been picked up by Yahoo! Finance and is based on statements from people familiar with the matter who asked not to be identified. The factory will provide lithium iron phosphate batteries for Ford’s electric models.

For political reasons, the two companies are weighing a novel ownership structure under which Ford would own 100% of the plant, including the building and the infrastructure, while CATL would operate the factory and own the technology to build the cells, the people said. Such an arrangement would let the facility qualify for lucrative production tax credits under the new Inflation Reduction Act while requiring no direct financial investment from CATL.

The Chinese government has discouraged CATL from investing in the US due to tensions with Beijing’s top geopolitical rival, according to insiders. The battery maker paused plans this summer to establish a new facility in North America after Pelosi’s trip to Taiwan.

The proposal is just one option that has emerged since the IRA was signed into law in August and is far from being a done deal, the people said. The lack of clarity around specific content requirements in the IRA is also impacting the decision, and sites in Mexico and Canada haven’t been ruled out. The Treasury Department is scheduled to issue guidance finalizing the content requirements and tax credits of the IRA by the end of this month.

Why The Ford Deal With CATL Isn’t Done Yet

“CATL is still deliberating on investing in the US and we have not made the decision yet,” the battery maker said in an email to Bloomberg. “There are multiple models being discussed regarding our investment in the US and all of those choices are purely based on and only based on business concerns.”

The company, which already has a deal to sell batteries to Ford for use in its flagship F-150 Lightning and Mustang Mach-E vehicles, said it’s “not true” that the Chinese government objects to CATL investing in the US. China’s Foreign Ministry said in a statement Thursday it was unaware of the situation. The Chinese Embassy in Washington had no immediate response to a request for comment. Ford said in a statement that “our talks with CATL continue and we have nothing new to announce.”

If Ford opts for Virginia or elsewhere, it would mark another high profile snub of its home state. It has agreed to build battery hubs in Tennessee and Kentucky in its initial $11 billion investment with South Korea’s SK Innovation Co.

“It is incredibly important to own the battery value chain, there’s no doubt,” Lisa Drake, Ford’s vice president of EV industrialization, said in an interview Tuesday on the sidelines of a Ford technology event. That “is why we are controlling the raw materials ourselves, nickel, lithium, etc.” She declined to comment on the specifics of negotiations with CATL.

CATL, the world’s biggest maker of batteries for electric vehicles, has been considering locations in Mexico and the US to supply cells to automakers including Ford and Tesla, Bloomberg reported earlier this year. But the production tax credit in the IRA, which is worth as much as $35 per kilowatt hour for each cell produced, could make manufacturing batteries in the US cheaper than making them in Mexico, according to people familiar with the matter. The subsidies also offset US tariffs on raw materials imported from China.

Ford announced its partnership with CATL in July, saying it had secured 70% of the battery capacity needed to build more than 2 million EVs annually starting in 2026, a goal set by CEO Jim Farley. During the company’s Q3 earnings call, Farley said Ford could “economically” import LFP batteries from China, but alluded to other options to localize production. “The real billion-dollar question is, when do you localize production of LFP in North America?” he said. “Whose name is on the front of the building?”

You know you’re deep in the world of politics when your biggest concern is what name is on the outside of the building.

SK On Battery Factory Going Up In Kentucky

While Ford dances with CATL over semantics and signage, work is progressing on the SK On battery factories in Kentucky, where SK On will invest $5.8 billion to produce advanced batteries for future Ford and Lincoln electric vehicles. The two factories are expected to begin production in 2025 and the work is on schedule according to a company press release.

When full production begins, the factories will be able to produce 80 GWh of batteries a year — enough to power 2 million electric vehicles. They will employ 5000 workers, who will be trained at the BlueOval SK Battery Park at the new Elizabethtown Community and Technical College (ECTC) BlueOval SK Training Center that will be part of the 1,500 acre BlueOval SK Battery Park site.

“At BlueOval SK Battery Park, we’re building the future — state of the art batteries for future Ford and Lincoln electric vehicles and a bright future for the workforce in Kentucky,” said David Hahm, BlueOval SK CEO. “In order to produce these batteries, we need a premier workforce that is trained in the latest battery and advanced manufacturing technology.” The ECTC BlueOval SK Training Center is the only co-branded learning facility within the Kentucky Community College System and represents a $25 million investment by the Commonwealth of Kentucky.

The curriculum within the 42,000-square-foot training facility will support battery knowledge, roles, and skills. BlueOval SK will train employees in SK On’s proprietary technical, quality and manufacturing processes in the ECTC BlueOval SK Training Center’s virtual reality labs, industrial maintenance lab, work simulation lab, and ergonomics techniques classrooms. The Kentucky Community and Technical College System (KCTCS) will begin construction of the ECTC BlueOval SK Training Center in 2023 and is scheduled to be completed in 2024.

The Takeaway

The final rules that will implement the provisions of the Inflation Reduction Act are being written as we speak by the US Treasury Department. A good guess is that Ford and CATL are waiting to see what the final version of the rules will be before concluding any agreement — if there is one.

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Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. 3000 years ago, Socrates said, "The secret to change is to focus all of your energy not on fighting the old but on building the new." Perhaps it's time we listened?


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