24 Nov EE Times : Ford Walks Fine Line as It Builds Gigafactory—With CATL
Media Source : EE Times
—Part of an ongoing EE Times series: A Vulnerable U.S. Electronics Supply Chain. Previous parts can be found here.
A multibillion-dollar gigafactory that Ford is building in Michigan to make EV batteries with Chinese partner CATL is a marriage of necessity, industry experts told EE Times. It’s also a marriage that Ford isn’t eager to trumpet—although the company did announce changes today related to its investment and the number of workers to be employed.
“Make no mistake about it, Ford will run the factory,” Bill Russo, the CEO of Shanghai-based strategy consulting and investment platform Automobility and the former head of Chrysler in China, said in an exclusive interview with EE Times. “It will be brick and mortar owned by Ford and not a JV,” he said, adding that the project avoids the stigma of being a Chinese factory.
Ford’s February announcement of the BlueOval Battery Park Michigan project in Marshall, Mich., hints at concerns over the China connection. The battery technology comes from CATL (Contemporary Amperex Technology Co. Ltd.), which is considered the world’s No. 1 EV-battery maker. Rather than banking on the prestige of working with and licensing technology from CATL, Ford buried mention of the collaboration in the announcement’s 13th paragraph.
The project comes amid an ongoing tech war and strained ties between Beijing and Washington. Mistrust follows a stream of concerns over the origins of Covid-19, IP theft and a spy balloon that flew over the U.S. this year.
“The only thing bipartisan in the U.S. right now is, ‘Let’s all agree China’s bad’,” Russo said.
While many automakers have not faced criticism over sourcing from China the batteries used to power EVs they have been selling in the U.S., legislators in Washington have demanded scrutiny of the Ford-CATL coupling.
“If they don’t put it on a boat but build a factory and assemble it in my backyard with U.S. workers, that’s bad,” Russo said. “That I don’t understand. If buying the battery, putting it on a ship and assembling it in the cars is O.K., why is putting the factory in Michigan and employing several thousand U.S. workers bad?”
Ford and CATL declined requests for comment on this article from EE Times.
China leads in EVs
U.S. President Joe Biden wants domestic EV production to help wean the U.S. off fossil fuels and revive American manufacturing. Biden’s 2022 Inflation Reduction Act (IRA) counts on U.S.-based EV battery production, which doesn’t exist today.
China about 20 years ago prioritized EVs over gas-powered cars. It subsequently built an industry around the newer tech and became its world leader.
China stands out as the only country to do this, EV industry consultant Sandy Munro told EE Times.
As a result, “There are significant amounts of intellectual property there that Chinese companies dominate,” Paul Triolo, adviser for global tech companies at the Washington, D.C.-based management consultancy Albright Stonebridge Group, told EE Times in an exclusive interview.
The IP includes:
- CATL’s lithium-iron-phosphate (abbreviated as LFP, with “F” standing for iron) EV batteries can charge to 80% of capacity in five minutes, according to the company’s website. Energy density has improved to 265 Wh/kg, helping to extend the EV driving range to as much as 1,000 km (621 miles) without charging.
- CATL and Chinese rival BYD (Build Your Dreams) use LFP as the main chemistry in their EV batteries. “LFP battery packs cost less, are less likely to catch fire and will last longer” than competing EV batteries, Munro said.
- The battery makers continue to develop new technology. CATL in April introduced a condensed-matter battery with an energy density sufficient to power electric passenger aircraft, Reuters reported.
China route always cheaper
Involvement with BYD and CATL is essential for U.S. vehicle manufacturers to make EVs that ordinary consumers can afford, Tu Le, managing director of Sino Auto Insights, a management consulting firm in Troy, Mich., told EE Times in an exclusive interview.
“The only way the U.S. legacies [automakers] can build an affordable vehicle is by using Chinese batteries,” Le said. “From a capacity and manufacturing standpoint, they’re going to be ahead of us in perpetuity.”
In addition to access to CATL’s technology and its support in setting up the BlueOval plant a little more than three miles west of downtown Marshall (population 6,822) and on the banks of the North Branch of the Kalamazoo River, some observers speculated that the project is Ford’s way of opening up the Chinese market to its EVs.
Meanwhile, others have expressed fear that the Ford-CATL arrangement will open the U.S. market to a flood of Chinese EV-battery makers.
“The concern on the U.S. government side is that they’re trying to build a domestic battery market” with Chinese plants in the U.S., Le said. “And the rest is, if we allow Chinese battery manufacturers into the country, we will never have a competitive domestic battery cell. The Chinese battery manufacturers will always go lower, meaning lower in price.”
U.S. EV supply chain weak
Ford’s plan to make its own batteries enables vertical integration and lower production costs.
“They need access to a supply chain that allows them to democratize the electric vehicle,” Russo said.
“That’s what Ford’s trying to do with CATL.”
China EV makers and Tesla have mature EV-battery supply chains, providing cost advantages over the
Detroit Three—Ford, General Motors and Stellantis—and other vehicle makers.
“Tesla was savvy in the early days of batteries about a decade ago,” Thomas Campbell, co-director at Leap Manufacturing, told EE Times in an exclusive interview. Leap aims to accelerate technology R&D to secure the U.S. competitiveness in high-tech.
“They even have investments in the mining industry,” he added, referring to Tesla. “They’ve gone deep down the supply chain to make sure that they get the batteries they need.”
Other automakers are struggling to get batteries and are forced to partner with Chinese companies, Campbell added.
In many critical areas of the EV-battery supply chain, Chinese firms are as many as 10 years ahead of their competitors, Triolo said. Especially with key EV battery parts, such as anode and cathode components, and battery chemistry formulations, such as lithium iron phosphate (LFP), where Chinese companies held as much as a 90% market share last year, he said.
China has about 45% of the world’s mining rights for lithium and about 70% of the refining capacity for the naturally occurring metal, Le said.
Ford faces domestic opposition to its deal with CATL, for geopolitical and environmental reasons. U.S. legislators have demanded scrutiny of the deal. Some local residents oppose the factory, but the state government has supported it with tax incentives.
“Michigan Governor [Gretchen] Whitmer wants to make Michigan a center of the EV battery supply chain,” Triolo said. “Chinese companies like BYD that want to actually build facilities in the U.S. are probably going to be looking for those states that are going to be more welcoming.”
Whitmer’s media representative didn’t respond to a request for comment on this article.
Chinese companies like CATL could build factories in Mexico, allowing it to become a hub in the supply chain for the U.S. market, Triolo said.
Notwithstanding geopolitical issues, the manufacturing industry faces a worker shortage. Ford had initially indicated it would need 2,500 people for initial production at the battery plant, slated for 2026.
“One gap is pretty substantial, and it’s similar to the semiconductor industry’s workforce development,” Campbell said. “Where do you get the people to make the batteries?”
CATL chasing new markets
To CATL, being in the U.S. market—the world’s No. 2 for cars—is consistent with staying the world’s biggest battery maker, Russo said. The battery maker’s growth will stagnate unless it expands to markets outside its home country.
China is no longer the growth market, Russo said. “It’s a market that’s going to be 25-30 million units. It’s been that way for six years in a row now. So, to CATL, globalization is also essential to continue to grow their business.”
Added Triolo: “Being shut out of either [the U.S. or European Union] market would be a major blow but would not necessarily undermine their global leadership. Chinese firms are also looking at other large markets, such as Southeast Asia, India and the smaller but important markets, such as the Middle East.”
Russo said going global may help CATL hedge against a potential breakup by China’s government for being a monopoly. CATL’s market share is more than two times that of its nearest competitor, LG Energy Solution.
“When you’re that big compared with your competition, you can be targeted for being a monopoly… but if you become a national champion, the less likely you are to be targeted,” he added.
Delays, cuts reported
Today, Ford announced it will cut back the number of workers at the plant, to about 1,700. The automaker resumed work at the site after a temporary stoppage and will cut its investment in BlueOval to about $2 billion, the Detroit Free Press reported.
Reuters reported in September that Ford had paused construction of the BlueOval site, citing concerns about its ability to competitively operate the plant at a time when it remained locked in UAW contract negotiations. However, the Detroit Free Press reported infrastructure work continued at the construction site, just not by Ford.
Le told EE Times last week that he thinks Ford stopped work at the BlueOval site because it “wasn’t a good look” while the automaker was negotiating a new contract with the UAW and because the company was caught off guard by the amount and severity of pushback it got on the project.
Russo last week said automakers are delaying their investments in EVs because of lackluster consumer demand, especially in the U.S.
In a move also related to the slowdown in EV demand, some South Korean EV battery makers that had been ramping up production in the U.S. have suspended projects, Nikkei Asia reported last week.