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| Ford Motor Executive Chairman Bill Ford announces a $3.5 billion investment plan for a lithium iron phosphate (LFP) battery plant in Marshall, Michigan, during an event held at Ford Ion Park in Romulus, Michigan, Monday (local time). Courtesy of Ford Motor |
By Park Jae-hyuk
Ford Motor and China's CATL have thwarted the plans of Korean electric vehicle (EV) battery manufacturers to dominate the North American market by capitalizing on the U.S. Inflation Reduction Act (IRA), according to industry officials, Tuesday.
The U.S. carmaker announced, on Monday local time, that it will build a lithium iron phosphate (LFP) battery plant in the state of Michigan by licensing technologies from the Chinese battery maker, which has the world's largest market share.
Given that the factory will be wholly owned by Ford and the two companies plan to minimize the use of key minerals and components from China, their strategy has enabled the U.S. firm to continue enjoying tax incentives and subsidies in accordance with the IRA, avoiding the Joe Biden administration's attempt to exclude Chinese battery makers from the U.S. market.
"Under the arrangement, Ford's wholly owned subsidiary would manufacture the battery cells using LFP battery cell knowledge and services provided by CATL," Ford said in a press release. "This new agreement with CATL adds to Ford's existing battery capacity and available battery technology made possible through a series of key collaborations ― including with SK On and LG Energy Solution (LGES)."
The announcement came a few weeks after Virginia Governor Glenn Youngkin refused Ford's plan to collaborate with CATL to build an EV battery plant in the southeastern state.
The Republican governor at that time emphasized concerns over the possibility of the partnership creating a security risk, saying that "'Made in Virginia' cannot be a front for the Chinese Communist Party."
Although Youngkin's stance aroused criticism from Democrats and some news outlets in Virginia, Korean battery makers were expected to enjoy benefits from the growing possibility of Ford cutting its ties with their Chinese rivals.
As Michigan decided to accommodate the Ford battery plant, however, Korean companies have had no choice but to adjust their strategies originally based on rosy outlooks.
"Under the circumstances surrounding the U.S. EV market, the IRA has been considered an event to offer exclusive benefits to Korea's rechargeable battery industry, because the phrase in the law, 'foreign entity of concern,' has been seen to target China," Samsung Securities analyst Chang Jung-hoon said. "If Ford's succeeds in its strategy, however, GM and Stellantis will highly likely consider taking similar strategies."
Industry officials raised concerns that other Chinese battery makers could follow CATL, threatening the market shares of Korean firms in North America.
According to an EV market tracker SNE Research, CATL's market share in the non-Chinese market last year soared 131 percent from a year earlier, taking second place following LGES.
"Although LGES retained the top spot in the non-Chinese market last year, Korea's three battery firms are likely to face intensifying competition with their Chinese rivals, which showed explosive growths despite the U.S. IRA," the institute said.
Korean battery manufacturers have remained cautious about Ford's next steps.
However, some industry officials raised questions about whether China's LFP batteries will be used for high-performance vehicles, given that those batteries are considered less efficient than nickel, cobalt and manganese (NCM) batteries produced by Korean firms.
The Samsung Securities analyst also said that Ford's partnership with CATL will have a limited impact on SK On, as the Korean company will continue its collaboration with the U.S. carmaker through their joint venture, BlueOval SK.
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