Ford details battery, raw materials sourcing strategies to support looming EV targets

Ford Motor Co. is moving to shore up its supply of electric-vehicle batteries and the raw materials needed to make them as it aims to hit a series of ambitious electrification targets in the coming years.

The Dearborn automaker said Thursday it has secured 100% of the battery capacity it needs — through a combination of existing suppliers boosting production and adding a new battery cell chemistry to its portfolio — to hit annual EV production capacity of 600,000 units by the end of next year. And the company said it has secured about 70% of the capacity it needs to produce 2 million EVs annually by the end of 2026.

Executives also detailed numerous deals the Blue Oval has struck to shore up its supply of raw materials needed for battery production, and announced plans for new facilities that will support expanded battery capacity.

 “Battery cell manufacturing capacity is the foundation of our EV business. And to support it, we are now building out supply chains — just as we said we would — going deeper than ever before to secure the raw materials that are necessary," Lisa Drake , Ford Model e's vice president of EV industrialization, said on a call Thursday. "We have direct-sourced our lithium and nickel to scale battery production more quickly and keep the volumes and the costs more stable over time.”

The supply-chain announcements came on the heels of Bloomberg reporting that Ford is preparing to cut as many as 8,000 jobs in the coming weeks, in a bid to increase profits to fund its electrification strategy. The company has said it's aiming to cut $3 billion in costs by 2026.

Asked about the report Thursday, Drake did not comment on it directly but said: "Smaller is better. A smaller team can move faster than a larger team, and that was a bit of the underpinning of why we split the company internally. And the Model e team is a little bit smaller than you might think. And that allows the agility and speed that we needed.”

The deals announced Thursday, for example, were put together quickly and over the course of just a few meetings and sign-offs from four or five "key decision makers," Drake said.

The supply-chain strategies announced Thursday, experts said, are important steps if Ford is to hit its targets and compete against EV market leader Tesla Inc. and other rivals.

"We view this as a strategic move by Ford to further get control over its supply chain in an arms race that we're seeing on EVs," said Dan Ives, an equity analyst at Wedbush Securities. "With raw material shortages around the globe, further reaching out into the end markets is a no-brainer move, in my opinion, for Farley and company."

Adding LFP batteries

Ford detailed for the first time how it plans to hit its targeted 600,000 EV run rate by the end of next year: by building 270,000 Mustang Mach-Es for North America, Europe and China; 150,000 F-150 Lightnings for North America; 150,000 Transit EVs for North America and Europe; and 30,000 units of a new SUV for Europe.

One way it's supporting that goal is by adding lithium iron phosphate, or LFP, battery cells to its portfolio. Currently, the automaker uses a nickel cobalt manganese chemistry. The move will help Ford reduce its reliance on minerals such as nickel and, at current costs, could bring 10% to 15% in savings over NCM batteries, the automaker said.

"I'm not at all surprised to see them accelerate and expand on the plans for use of LFP, and I expect that we will be seeing more of that from other manufacturers in the next 12 months," said Sam Abuelsamid, principal analyst at Guidehouse Insights.

LFP batteries have the advantages of being more stable, more durable and safer than chemistries that include nickel, although they also have lower energy density, Abuelsamid said.

Chinese battery maker Contemporary Amperex Technology Co. Ltd., or CATL, will supply full LFP battery packs for the Mach-E in North America starting next year, and for the F-150 Lightning starting in early 2024.

"What we’re doing is importing some battery cell capacity to help meet that demand, get more products in the hands of our customers, who we know will then be in EVs for life once they actually drive these types of products," Drake said of the company's move to import some batteries from China. "And then we’re taking that next step to localize it in North America. There’s going to be many ways that we have to scale EV production and this is just one of them.” 

Shoring up battery capacity, raw material supplies

Ford — which is investing $50 billion in electrification through 2026 as it targets an adjusted operating profit margin of 10% — said it has secured enough battery capacity through 2023.

Supplier LG Energy Solution, for example, has doubled capacity at a plant in Poland to support additional NCM cell production for the Mach-E and E-Transit, Ford said. And supplier SK On has boosted capacity at facilities in Atlanta and Hungary to support the F-150 Lightning and E-Transits through late next year.

Meanwhile, the automaker said it has sourced about 70% of the battery cell capacity it needs to hit the 2 million EV run rate by the end of 2026. One example: Ford has signed a non-binding memorandum of understanding with CATL to supply batteries in China, Europe and North America. 

And Ford plans to add 40 gigawatt hours of LFP battery capacity in North America starting in 2026, to complement the three battery plants Ford and joint-venture partner SK On previously announced in Tennessee and Kentucky. Executives declined to go into additional detail about that plan.

The company also announced some of its plans around sourcing key raw materials needed for battery cell production, saying it has secured most of the nickel it needs through 2026.

Ford has signed non-binding MOUs with Vale Canada Ltd. "to explore potential opportunities across the EV value chain," according to a news release. The automaker is "exploring" a three-way nickel processing project with PT Vale Indonesia and Huayou Cobalt, and separately a nickel off-take agreement with Huayou. And the company said a multi-year nickel supply agreement with BHP "could start as early as 2025 and may involve additional commodities over time."

Ford also announced several lithium supply contracts it has secured. 

It has signed a non-binding letter of intent with EcoPro BM and SK On to establish a cathode production facility in North America, for example. 

Ford also introduced a new hire, Annie Liu, to head up purchasing for the company's EV business. Liu previously worked at Microsoft Corp. and Tesla.

Ford's assurance that it has most of its battery capacity shored up for the next few years, Wedbush's Ives said, will likely be reassuring to investors.

“I think it solidifies the strategy, and now it’s going to be about execution. But they're not going to get into the top of the EV market share if they don't have the supply and raw materials," he said. "I think this was a smart and proactive strategy by Ford. I think that shows the evolving DNA of the company, how they’re not just looking in front of them, they’re looking a few years in front of them.”

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski