Ford Motor lowers its EV battery plant ambitions in Michigan. Low and slow consumer demand for electric vehicles and rising labor costs prompted the company to scale back plans for the $3.5 billion battery plant and cut costs.
In February, Ford executives CEO Jim Farley and Chair Bill Ford announced the company’s battery factor plans. However, the facility soon became a political target due to its association with the Chinese battery manufacturer Contemporary Amperex Technology (CATL). While Ford wholly owns the plant, the US technology used is licensed from CATL to produce new lithium iron phosphate batteries for EVs.
The battery plant has met with political pushback from federal and local officials. US lawmakers have also been tasked with reviewing the licensing deal between Ford and CATL due to the heightened tensions between China and the US.
In a statement, Ford announced its plans to cut production capacity by approximately 43% to 20 gigawatt hours yearly and reduce expected employment from 2,500 to 1,700 jobs. The company did not disclose how much it would reduce its investment in the plant, but per the reduced capacity, the investment would still be around $2 billion.
However, after considering all the factors, including expected demand and growth for EVs, Ford’s business and product cycle plans, and the affordability and business to ensure the plant is sustainable, Ford Chief Communications Officer Mark Truby said the company is “moving forward with the plant, albeit in a slightly smaller size and scope than what we originally announced.”
Truby added that the plant is still expected to be inaugurated in 2026, even though the company paused the facility’s production for two months during the collective negotiations with the United Auto Workers (UAW). The bargaining concluded last week, with Ford-UAW employees signing a deal including significant wage increases and a direction for battery workers at the plant to be added to the record agreement if hosted by the union.
The Ford CCO also mentioned rising labor costs as a major deciding factor in scaling back the plans. Last month, Ford CFO John Lawler announced the new deal would add $850 to $900 per vehicle assembled in labor costs.
While Lawler did not present an estimate of how much the deal would cost the company, Deutsche Bank estimated the cost would increase to $6.2 billion during the agreement’s terms.
Truby added, “We’re still very bullish on EVs and our EV strategy, but clearly, while there is growth, both in the US and worldwide, clearly, the growth isn’t at the rate that we and others had expected.” He also said that the company still believes licensing the technology instead of importing batteries overseas will benefit both the company and the US. The plant is expected to be the first US battery plant to produce LFP batteries.
Ford, which currently sources LFP batteries from CATL, follows Tesla’s approach of using LFP batteries in parts of its vehicles to reduce the amount of cobalt required to produce battery cells and high-voltage battery packs.