Ford's Chinese Battery Plant: Pause & Pivot
Ford's Chinese Battery Plant: Pause & Pivot
Ford, CATL, Tesla, Zeekr, Chemix, Polestar, Gotion, India
Ford's Chinese Battery Plant: Pause & Pivot
Yesterday morning Ford announced that it would pause construction on a $3.5 billion battery plant in Marshall, Michigan. The UAW is outraged. Republicans are delighted. And the average Joe on the street feels confused.
What is going on?
Let’s go back to the beginning. Imagine a Ford board meeting in the summer of 2022. A heated exchange breaks out.
CEO: Why the hell aren’t we selling more Mach-Es?
Money & Legal Team: Price. No room to cut - and we’re already losing money on it.
CEO: Well, how do we get some costs out?
MLT: An LFP battery would be 20% cheaper. But there might be….
CEO: Get on it.
MLT: Umm, might be a slight issue. China owns LFP batteries - as in total control.
CEO: Will it move the needle? Do I need to get personally involved? What are you just standing there for?
MLT:: Yessir.
CEO: And by the way, make sure we get those Fed battery subsidies!
Elegant Solution or Sophistry?
Ford learned that Tesla buys some LFP batteries from CATL. Ford could have done the same. But that would have left Ford without the Fed battery subsidies flowing from the Inflation Reduction Act.
So Ford’s money and legal team devised an elegant (or too clever by twice?) solution: Build a giant Ford-owned battery plant – “Look, Joe B., no Chinese ownership!” Then apply for Fed subsidies.
Then license LFP know-how from CATL. Get lower battery costs, reduce prices and sell Mach E’s like crazy.
Voila.
The Trouble With Too Clever
There are three problems with Ford’s master plan:
• LFP may not be a magic catalyst for Mach-E and F-150 sales. Lower costs are, of course, welcome. But what if American customers do not like the shorter LFP range? Americans drive a lot further in much heavier vehicles than the Chinese and Europeans. Or, what if the real reason Ford is not selling more EVs is because of shaky charging networks or glitchy software?
• The Chinese battery maker would slow-walk LFP tech transfer to Ford. That is exactly what Western automakers did with internal combustion engine tech transfer to their Chinese JV partners - for decades. Ford would be entering a game of forever catch-up, always a step behind on battery innovation.
• The common man senses a workaround. The purpose of the IRA subsidies is to support America’s battery industry. Chinese battery makers do not qualify. But the reality is that any Fed money flowing to the Ford plant would eventually find its way into CATL’s pockets. Republicans and Democrats would naturally question why Ford is not investing in partnerships with home-grown battery startups like Michigan-based Our Next Energy, San Francisco’s Sila Nano or Seattle’s Group 14.
So What, Now What
Ford’s battery plant pause is being seen as a negotiating tactic to make the UAW feel anxious. “It’s a shameful barely veiled threat by Ford to cut jobs,” says UAW Chief Shawn Fain.
That may be so.
But, just as likely, Ford senses the weakness in its too-clever solution. Partnering with CATL might - and I emphasize might - ignite a bump in sales short-term. But it gives CATL, and the Chinese government, enormous leverage over America’s number two automaker.
Pivot Point
“It’s time for Ford to call this deal off for good,” says House CCP Chair Robert Gallagher.
Look for Ford to use this pause to re-think its grand strategy for batteries. Instead of feeding Chinese battery dependency, Ford should invest at least some of that $3.5 billion into American startups developing next generation battery chemistries.
Future Cars & Markets
Electrics
Zeekr Into Europe. Zeekr, a Geely group company, is shipping its 001 and X models into Europe this month. Low-cost cars, these are not. The 001 starts at $63,000 and the X SUV begins at $47,000. Link
Tesla - Playing the Field, Awkwardly. Elon Musk is in discussions with at least four different countries about where to place the next Tesla gigafactory: Indonesia, Korea, India or Turkey. Turkey’s prospects may have dropped a notch last week when, in a face-to-face, the Turkish president Erdogan asked Musk: “Where’s your wife?” Link
Polestar - Up and Down. Chinese-owned Polestar lost $300 million in the most recent quarter. Sales were up in the UK and Sweden but down in the US and China. No doubt company leaders wish it were the other way around. The Polestar 3 debuts in the US next year, not a moment too soon. Link
Batteries / Supply Chains
Gotion - US Security Review. Only weeks after Chinese battery maker Gotion announced a multi-billion dollar investment into Illinois, Republicans are seeking a security review. This comes just days after the US government asked Tesla to clarify its relationship with CATL. Link
Advanced Technologies
Chemix. Just when we thought we had reached the upper limits of battery breakthroughs, AI steps in. Co-founder and CTO Jason Koeller joined me for a conversation about how his company uses AI to maximize the speed and reliability of developing new battery chemistries. Coming up in October on the Driving With Dunne podcast. Link
New Numbers / Milestones
1. Tesla China > Half. A stunning 56% of Teslas produced worldwide this quarter will be built in the People’s Republic of China. (Via James Cat on X).
2. China’s EV Offerings. Americans have about 50 EV models to choose from. Europeans have 100. And Chinese people can opt for one of more than 150 models ranging from $5,000 to $120,000. (Via Dana Hull at Bloomberg).
3. Jaan / The EV Universe. Last week, I mentioned that Jaan brings great energy and information about EVs. Check out his weekly newsletter. This time the link should be good to go. Link
3. India’s 1 Million EV Asterisk. Sales of EVs in India surpassed 1 million units this past fiscal year. Fine print: Half are two wheelers. Another chunk is three wheelers. And the rest roll on four wheels. Maybe more developing / lower income countries should count EVs in this way, too. Via Reilly Brennan’s Future of Transportation.
His Blockbuster China Story Won a Pulitzer
David Barboza, Former NY Times Reporter & Founder of The Wire - China
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