Ford to buy cheaper CATL EV batteries to catch Tesla (updated)

Ioneer

21/07/2022 19:40

(Repeats for more subscribers)
    By Joseph White and Ben Klayman
    DETROIT, July 21 (Reuters) - Ford Motor Co  F.N  on Thursday
said it will import lower-cost lithium iron batteries for its
North American electric pickup trucks and SUVs from Chinese
battery champion CATL  300750.SZ , as it works on a broader
alliance with CATL and an array of separate deals to secure
battery and battery materials into the next decade.
    Ford Vice President Lisa Drake said the automaker plans to
secure lithium-iron, or LFP, batteries from a new 40 GWh factory
in North America starting in 2026. Drake would not say if that
factory would be built by CATL. Reuters reported in May that
CATL was looking at U.S. sites to build EV batteries to serve
Ford and BMW.  urn:newsml:reuters.com:*:nL2N2WX0VH
    Ford's decision to use lithium-iron batteries in its
best-selling North American EVs is the latest sign that lithium
iron's lower cost - Ford said the chemistry can cut material
costs by 10-15% - is worth the trade-off in range. Tesla is
offering LFP batteries in some lower-priced Model 3 sedans sold
in the United States. Electric truck and van maker Rivian
 RIVN.O  also has said it intends to use LFP batteries.
    Drake said Ford wants to secure more batteries and battery
materials from North America, but cautioned: "I wouldn't say
that we have 100% confidence that all of these can be
localized...It's hard work."
    Ford said it also has agreed with CATL to explore using the
Chinese company's batteries in Ford vehicles sold in the United
States, Europe and China.
    CATL said in a statement "the two companies plan to leverage
their respective strengths to jointly explore new business
opportunities worldwide," involving lithium-iron and other
battery technologies. 
    The CATL agreements are part of a series of deals Ford
disclosed to show that it is speeding up efforts to secure
battery capacity and raw materials. Among them was an agreement
to explore buying lithium from Australian mining giant Rio Tinto
 RIO.AX , and nickel from Vale SA's units in Canada and
Indonesia, China's Huayou Cobalt  603799.SS  and BHP
 BHP.AX . urn:newsml:reuters.com:*:nL1N2Z200C  urn:newsml:reuters.com:*:nL4N2Z231K
    Some of the metals agreements are linked to projects that
likely will not be producing until the later part of the decade.
The Rio and Compass Minerals  CMP.N  deals involve so-called
direct lithium extraction technologies that have never worked at
commercial scale.
    Investors are concerned that supplies of battery materials
and battery-making capacity will not keep up with demand for
electric vehicles, leaving some automakers short in the later
years of this decade.
    Ford said it has now sourced about 70% of the battery
capacity it needs to support its goal of building more than 2
million EVs worldwide by late 2026.
    U.S. government officials are increasingly concerned about
the auto industry's reliance on China as the dominant source for
battery materials and battery cells. 
    Ford's decision to use CATL's lithium iron phosphate
batteries for the Mustang Mach-E starting next year, and the
F-150 Lightning in 2024, marks a significant win for the Chinese
battery maker, and a shift in U.S. marketing strategy for Ford.
    Lithium-iron batteries typically deliver less driving range
than comparable batteries that use nickel and cobalt, and until
recently, automakers had stuck with more expensive nickel-cobalt
chemistries for the U.S. market, where longer driving range is a
key competitive measure.
     "We know battery material costs is where the war will be
won," Drake said during a call Thursday. "LFP will give the
biggest step function down" in costs. 
    Lower-cost batteries could allow Ford to drop prices for the
Lightning and Mach-E, or boost profit margins.
    Ford said it is aiming for 8% pretax profit margins on its
EVs by 2026. The company has said its EV business currently is
not profitable. Even an 8% margin would be short of the 14.6%
operating margin Tesla Inc  TSLA.O  reported Wednesday for the
second quarter.
    Ford is aiming to expand its annual EV production rate to
600,000 vehicles globally by late 2023, and more than 2 million
by the end of 2026. It expects the compound annual growth rate
for EVs to top 90% through 2026, more than doubling the forecast
industry growth rate.
    In March, Ford boosted its planned spending on EVs through
2026 to $50 billion from its prior target of $30 billion, and
reorganized its operations into separate units focused on EVs
and gasoline-powered vehicles with Ford Model e and Ford Blue,
respectively.  urn:newsml:reuters.com:*:nL4N2V52YG
    The company is also working with LG Energy Solution and its
long-time battery partner SK Innovation.  096770.KS 

 (Reporting by Joseph White and Ben Klayman in Detroit,
additional reporting by Ernest Scheyder in Houston
Editing by Bernadette Baum and Andrea Ricci)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))