Ford is partnering with a Chinese supplier on a battery factory


Ford Motor Co (NYSE: F), on Monday, said it’ll collaborate with CATL on a $3.50 billion battery facility for electric vehicles in Michigan. Shares ended comfortably in the green today.

What’s in it for Ford?

The legacy automaker confirmed that it’ll license the technology from the Chinese supplier but refused to divulge the financial details of the agreement.

The new factory will produce LFP – lithium iron phosphate batteries that are known to be more cost-effective than the nickel cobalt manganese batteries that Ford is using currently. On CNBC’s “Power Lunch”, CEO Jim Farley said:

We’re scaling up to 600,000 units by year-end. These batteries are less expensive, better business for us. They’ll help us get to that 8.0% roadmap for profitable EVs. Scaling EVs is great but you have to make money on them.

Last week, a Deutsche Bank analyst recommended selling Ford stock after its disappointing fourth-quarter results (find out more).

Why did Ford pick China?

According to Ford, the plant that’s expected to employ roughly 2,500 people will go live in 2026. The announcement comes at a time when the Sino-U.S. tensions seem to be flaring up again. Still, the chief executive added:

This plant is a wholly owned subsidiary of Ford. We run the plant, it’s out investment, it’ll be run by our people. So, we don’t really have any concerns at all.

CEO Farley also said that there wasn’t a viable alternative in the U.S. with whom Ford could partner on this plant.

Vehicles produced at this factory, he concluded, will be eligible for federal tax incentives as well. Year-to-date, Ford stock is currently up more than 10%.

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