Ford (NYSE: F) is reportedly looking to set up a battery plant in Michigan in collaboration with China’s CATL. The company is looking to ramp up its EV (electric vehicle) production significantly for which securing batteries and key materials would be imperative.
Ford and CATL haven’t yet commented on the venture but the official announcement could come as soon as Monday. Previously, Virginia was also in the race for the plant. However, Virginia Governor Glenn Youngkin backed out of the competition since CATL is a Chinese company.
Last year, US President Joe Biden signed the inflation Reduction Act of 2022 which enhances the EV tax credit. Companies like Tesla, Toyota, and General Motors whose models stopped qualifying for the $7,500 EV tax credit are also eligible now.
Unsurprisingly, analysts turned bullish on Tesla and advised buying the stock after the Act was passed.
Incidentally, after the Inflation Reduction Act was passed, Toyota also doubled down its investment in its battery plant in the US.
The Act also pushes for localized battery production. Also, the EV tax would not be applicable if the battery components are produced or assembled by a “foreign entity of concern.”
Since Ford would have ownership of the reported plant in Michigan, it would still likely be eligible for the tax credit according to Reuters.
Ford Looking to Set up Battery Plant in Michigan
Ford has been looking to ramp up its EV production and last year it ranked second among EV sellers in the US. Tesla however leads the US EV market by a fairly wide margin.
Ford’s monthly EV production run rate was 12,000 monthly in December 2022 and it is looking to increase it fivefold by the end of this year. The company is targeting an EV production capacity of 2 million cars by 2026.
Global EV sales are rising at a fast pace and Tesla and other automakers are scrambling to secure supplies of key battery materials like cobalt and lithium.
General Motors announced partnerships with LG Chem and Livent to secure supplies of battery materials. It also partnered with Glencore for cobalt supplies. Glencore is the world’s largest cobalt miner.
Mining companies like Glencore which produce materials critical for EV batteries have been quite sought after. There is a guide on how to trade in commodities like copper which are critical for EVs.
EV Companies Lower Prices amid the Price War
Meanwhile, we are now witnessing a price war in the EV market. Recently, Ford lowered Mach-E prices between $600-$5,900 and the average price cut comes to around $4,500.
Ford’s price cut came days after market leader Tesla lowered Model 3 and Model Y prices in the US and Europe. The Elon Musk-run company also lowered car prices in China, for the second time in three months.
Some Chinese companies like Xpeng Motors and BYD also cut prices after Tesla’s price cut announcements.
In a related move, last week Lucid Motors offered a $7,500 “credit” to buyers of select versions of Lucid Air Touring and Lucid Grand Touring. The price and terminology for the “credit” are similar to the $7,500 federal EV tax credit that many eligible models get.
Irrespective of the term though, it is a discount for all practical purposes and yet another confirmation of the EV price war.
Ford has Sold Most of Rivian Shares
Coming back to Ford, the company has sold most of its Rivian stake and now holds only about 1% of the EV company. When Rivian went public in 2021, Ford was the second-largest stockholder.
However, the company has been gradually selling shares even as Amazon, which is the largest Rivian stockholder, is holding on to its stake.
During the Q4 2022 earnings call, announced a quarterly dividend of 15 cents along with a supplemental dividend of 65 cents. The supplemental dividend looks on account of proceeds from the Rivian stake sale.
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