Ford said on Thursday it had strengthened its battery supply chain as part of its global strategy to sell more than 2 million electric vehicles a year by 2026.
The automaker, which is investing $50 billion to upgrade its electric battery portfolio through 2026, said it plans to increase battery capacity, shorten its supply chain and use lithium iron phosphate (LFP) batteries for some of its electric vehicles. LFP batteries are a cheaper cell chemistry that is gaining popularity among automakers competing for a share of the burgeoning electric vehicle segment.
Ford said the moves will help it stay on track to meet its near-term goal of increasing electric vehicle production to 600,000 units by 2023 and 2 million units by 2026. company said it had supplied 70% of the battery capacity to meet its 2026 sales target so far.
Reaching its electric vehicle production targets could require around 8,000 job cuts, according to unnamed sources cited by Bloomberg.
Executives did not address the layoffs directly during a briefing with analysts and the media on Thursday, but said speed and agility are crucial for Ford’s battery-electric Model e division. Removing bureaucracy means they can close deals in days rather than months, said Lisa Drake, vice president of electric vehicle industrialization at Ford Model e.
“Believe it or not to move quickly through this space, smaller is better,” she said. “A small team can go faster than a big team.”
Lithium iron phosphate batteries
Ford said it will begin incorporating LFP batteries into its portfolio while continuing to use the nickel cobalt manganese (NCM) chemistry that currently powers its electric vehicles. As a cheaper alternative, the LFP presents a potential path for the mass electric vehicle market, analysts say.
CATL, the world’s largest battery supplier, will supply LFP batteries for Ford Mustang Mach-E SUVs in North America starting next year, followed by F-150 Lightning pickup trucks in early 2024.
LFP batteries offer cost advantages over NCMs, but are less powerful due to their lower energy density. The chemistry might seem like a confusing choice to back up two of Ford’s most muscular models, but “these standard line batteries provide customers with many years of operation with minimal range loss after numerous charge cycles,” said Drake. “This benefits owners who need to charge often, like our commercial customers.”
Using LFPs will help reduce Ford’s reliance on rare critical minerals such as nickel and cobalt, while reducing its battery material costs by 10 to 15 percent, according to Drake.
The company declined to say how many of its electric vehicles will use LFP chemistry, but said it has signed non-binding memorandums of understanding with lithium suppliers Liontown Resources and Rio Tinto.
Ford also said it has increased its contracts with NCM battery suppliers to meet its end-2023 production target. LG Energy will double its NCM battery capacity to power Ford’s Mach-E and E-Transit pickup trucks.
SK On has increased production at its Georgia plant to supply Ford with more NCM cells and will supply additional batteries from its plant in Hungary to power the F-150 Lightning and E-Transit through the end of 2023.
This is in addition to the agreement Ford and SK On reached last week to create an $11.4 billion joint venture to build and operate the Blue Oval City complex in Stanton, Tennessee, and two EV battery factories in Glendale, Kentucky.
Ford also announced Thursday a non-binding agreement with CATL to explore a partnership on LFP batteries in Chinese and European markets.
As Ford ramps up production of electric vehicles, it needs to reinvent its supply chain by directly sourcing battery raw materials, executives say.
“Battery cell manufacturing capability is the foundation of our EV business,” Drake said. “We purchased our lithium and nickel directly to ramp up battery production faster and keep volumes and costs more stable over time.”
The automaker said Thursday it has sourced most of the nickel it needs through 2026 and has signed non-binding memorandums of understanding with mining partners including Vale Canada, PT Vale Indonesia, Huayou Cobalt and BHP.