Electric vehicles

Ford’s flurry of battery deals gives it greater control over its supply chain

It says it has now secured 70% of the battery capacity for its 2026 goal of 2 million EVs.
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· 4 min read

Ford is inking deals left and right in its bid to solve the most pressing challenge facing EV makers around the world: how to build enough batteries.

Last year, Ford laid out the ambitious and expensive route it hopes to take to become a global EV leader: The company plans to spend more than $50 billion on electrification over the next four years as it aims to build 2 million EVs annually by the end of 2026. For context, Ford sold 27,140 battery-powered vehicles last year.

Last week, the company announced deals with some of the biggest players in the battery world to help it reach those goals. Ford is also planning to cut as many as 8,000  jobs on the internal-combustion engine side of its business to help fund EV plans, according to reporting from Bloomberg.

Ford’s new battery contracts aim to tackle challenges in both the finished-product and raw-materials supply chains, and the company’s moves will likely give it greater security in both. The automaker said it now has 70% of the battery capacity it will need to meet its 2026 production goal. Ford is also seeking agreements with suppliers farther upstream to secure critical materials—a step fewer OEMs have taken so far.

Finished products: Ford will take advantage of increased production capacity from long-time battery partners LG Energy Solution and SK Innovation. The company also struck a new deal with Chinese-battery maker CATL to source LFP battery packs for several of its EVs, beginning with the Mustang Mach-E next year.

The contracts add up to 60 gigawatt hours of annual battery capacity, which is enough to meet Ford’s goal of producing 600,000 EVs per year by late 2023, according to the company.

Lithium: The price of lithium has soared this year as rapidly increasing demand for lithium-ion batteries met insufficient supply. Last week, Ford reached a nonbinding agreement with Australian mining giant Rio Tinto for a “significant” amount of lithium, according to the company.

The automaker also signed a binding lithium off-take agreement with ioneer Ltd., an Australian mining company developing the Rhyolite Ridge project in Nevada, for 7,000 metric tons of lithium carbonate over five years, and a nonbinding agreement with Kansas-based Compass Minerals to potentially purchase battery-grade lithium from its brine project in Utah beginning in 2025.

  • These deals follow Ford’s off-take agreement with Australia’s Liontown Resources at the end of June to purchase lithium from its project in Western Australia.

Nickel: The automaker is also focused on securing nickel, which experienced a historic price spike earlier this year and is expected to remain a tight market throughout 2022. Ford announced last week that it is exploring options with miner Vale, the world’s largest nickel producer, in both Canada and Indonesia.

  • In Indonesia, the company is exploring a three-way nickel processing project that includes China’s Huayou Cobalt. Separately, Ford announced an off-take agreement with Huayou for nickel supply.
  • The company is also in talks with Australian mining company BHP to purchase nickel from its operations in Australia beginning as early as 2025.
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Big picture: While these moves to establish battery supply chains are more aggressive than what other EV makers have shared so far, they still may not be enough. To achieve its 2026 production goal, Ford could need to get its hands on one-fifth of the global battery-grade lithium capacity projected to be available in that year, per Benchmark Mineral Intelligence analysis.

Meanwhile, it will continue to be difficult and expensive to source battery metals like lithium, nickel, and cobalt, as demand is expected to outpace supply this year, according to BloombergNEF.

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