Ford Doesn't See an Advantage to Having Its Own EV Battery Plant: Report

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【Summary】Going against the grain, Ford doesn’t believe that investing in battery production for electric vehicles is a strong bet.

Original Vineeth Joel Patel    Oct 12, 2020 7:00 AM PT
Ford Doesn't See an Advantage to Having Its Own EV Battery Plant: Report

Nearly all of the automakers that are working on electric vehicles, plug-in hybrids, or hybrids believe that investing money in a facility to produce and manufacture factories is the best way to go. While the initial investment is massive, automakers believe that having a place to produce and manufacture batteries for vehicles is better than going down the route of entering into a long-term partnership with a supplier. One major automaker is going against the grain, claiming that it doesn't see a benefit in having its own battery production, and that's Ford.

Ford To Get Batteries From Suppliers

According to a report from Automotive News, Ford is one of the few automakers that doesn't see any benefit to having its own battery production facility. Despite having a few high-profile electric vehicles in the pipeline, like the Ford Mustang Mach-E and the electric variant of the F-150 pickup truck, the outlet claims that Ford executives believe that they're better off getting batteries from suppliers instead of producing their own.

While other automakers are pouring billions into massive manufacturing facilities for EV batteries, Ford believes going with a supplier gives it more flexibility if demand for its electric vehicles falls flat. The decision also gives Ford some leeway if a breakthrough in battery technology happens. The outlet points toward the recent increase in battery capacity as one of the prime reasons to stick with suppliers.

"The supply chain has ramped up since Elon [Musk] built his Gigafactory, and so there's plenty there that does not warrant us to migrate our capital into owning our factory," outgoing Ford CEO Jim Hackett said during the automaker's second-quarter earnings call. "There's no advantage in the ownership in terms of cost or sourcing."

Why Ford Believes It's Right

Ford's plans are a large departure from other automakers'. Automotive News points toward Tesla, which recently invested $5 billion into its Nevada Gigafactory, which is responsible for manufacturing lithium-ion batteries for all of its electric vehicles. The batteries are built in partnership with Panasonic. General Motors, Ford's largest rival, recently started constructing a plant in Ohio where it plans to manufacture its proprietary Ultium battery cells. That's possible because of a $2.3 billion joint venture with LG Chem. It's not just American manufacturers, but German ones, too, as Volkswagen and Daimler have plans for facilities to manufacture batteries.

For Ford to see any benefit in manufacturing its own batteries, the automaker would need to produce 100,000 to 150,000 EVs every year, claims Hau Thai-Tang, Ford's head of product development and purchasing. Those are insane figures and Ford's unlikely to meet those numbers with just the Mustang Mach-E and electric F-150.

"We don't have that volume initially to justify that capital expenditure," said Thai-Tang. "There's insufficient scale for any one OEM, other than somebody who's a full-line battery-electric manufacturer like Tesla, to justify that spending."

Things could change in the future when Ford has locked down a full line of electric vehicles and American consumers show interest in them, but at the moment, the automaker is looking to play it safe

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