President Biden has the ambitious goal of electrifying 50% of all motor vehicles by 2030 and the market is ramping up production to prepare for that target date. Electric Vehicle (EV) sales have tripled since 2020, which has dramatically increased demand for critical minerals used in EV batteries such as lithium, cobalt and nickel. As a result, the “American Battery Material Initiative” was first launched in October 2022, aiming to increase domestic production of electric vehicles batteries, and minimize reliance on China, which has been dominating EV production.
The single largest loan by far from the Department of Energy (DOE) went to Ford Motor in June 2023. Ford will use this $9.2 billion to build three EV battery factories, in order to accelerate the capacity of their EV unit. The EV unit (also known as Model e) is targeted to have 8% EBIT profit by 2026 with 2-million-unit sales.
The transition to EVs is in the foreseeable future; Tesla currently has the leading BNEF Automaker Electric Vehicle Exposure Score (a measure of the degree to which BEVs and PHEVs feature in the current operations and future plans of vehicle manufactures), followed by BYD (rank No. 2), while Ford ranks No. 27.
In an effort to ramp up production, BlueOvalSK, Ford’s joint venture with South Korean battery manufacturer SK Innovation, is aiming to build new facilities in Tennessee and Kentucky to supply about 120 gigawatt hours a year. Another new facility will be built in Marshall, Michigan as part of a wholly owned subsidiary of Ford with technology agreement from Contemporary Amperex Technology (CATL), which dominates global production of LFP (lithium iron phosphate) batteries. This new battery will be cheaper; Ford CEO James D. Farley Jr said at an earnings call earlier this year in May, “We expected to produce one of the industry’s least expensive batteries ever”. This facility will add approximately 35 gigawatt hours per year.
The price decline in critical EV battery metals including lithium, nickel and cobalt might be good news for battery manufacturers and EV producers as lower costs could be achieved to boost margins.