Ford revving its (electric) engine

Ford believes it now has enough battery supplies to allow it to produce 600,000 electric vehicles a year by the end of 2023 and it thinks it has covered around 70% of the 2 million annual production it is forecasting by the end of 2026.

The assessment came after the US carmaker announced a series of deals to accelerate its shift to EVs, including sourcing battery capacity and raw materials from companies such as Chinese battery giant Contemporary Amperex or CATL and Australian mining giant Rio Tinto.

In March, Ford boosted its planned spending on EVs through 2026 to $US50 billion from its prior target of $US30 billion, and restructured its operations into separate units focused on EVs and gasoline-powered vehicles – called Ford Model e and Ford Blue, respectively.

Ford says that the deals with CATL and Rio and changing existing deals with other battery suppliers, will help it get to a yearly rate of 2 million units by 2026 and cut costs.

Ford said it expects a compound annual sales growth rate for EVs to top 90% through 2026, more than doubling the forecast industry growth rate.

“Ford’s new electric vehicle lineup has generated huge enthusiasm and demand, and now we are putting the industrial system in place to scale quickly,” Ford CEO Jim Farley said in a statement on Thursday.

“Our Model e team has moved with speed, focus and creativity to secure the battery capacity and raw materials we need to deliver breakthrough EVs for millions of customers.”

As part of the new push, Ford says that it will begin offering vehicles with lower-cost lithium iron phosphate (LFP) batteries from CATL.

While LFP batteries provide somewhat shorter range per pound than Ford’s current batteries, they also cost about 10% to 15% less. Ford says they will also reduce the company’s reliance on minerals such as nickel that are expected to be in short supply over the next few years.

Ford will offer the LFP batteries alongside its nickel cobalt manganese (NCM) models. Ford said it has secured all of the 60-gigawatt-hours (GWh) of cell capacity needed to support the 600,000-run rate.

Ford said it will start offering its Mustang Mach-E with CATL-supplied LFP battery packs next year, and will expand the option to its F-150 Lightning pickup truck in early 2024.

At the same time, Ford said it will lean on its current battery suppliers, the Korean companies LG Energy Solution and SK On, to meet its late-2023 production targets and to help it get to 2 million EVs a year by 2026.

Ford said as of now, it has already secured about 70% of the battery capacity needed to support that latter goal. The automaker has signed a non-binding memorandum with CATL to explore a larger relationship that could make up much of the remaining ground, it said.

Ford and Rio Tinto signed a non-binding global memorandum of understanding (MOU) to jointly develop more sustainable and secure supply chains for battery and low-carbon materials to be used in Ford vehicles.

The multi-materials partnership will support the transition toward a net-zero future by supplying Ford, one of the world’s largest automakers, with materials including lithium, low-carbon aluminium and copper.

Rio says it will allow it to progress its commitment to work with customers to decarbonise value chains.

Under the agreement, Ford will explore becoming the foundation customer for Rio Tinto’s proposed billion-dollar-plus Rincon lithium project in Argentina.

Rio Tinto is currently progressing detailed planning to bring Rincon into production and will work with Ford toward a significant lithium off-take agreement to support its production of electric vehicles.

The companies will also work together to strengthen the supply of low carbon aluminium for use in Ford vehicles.

Ford and Rio Tinto will also work to develop secure, domestic supply chains for Ford across other essential commodities for the energy transition from Rio Tinto’s operations in North America, including copper produced with a low-carbon footprint (Rio owns the huge Kennecott copper mining operation in Utah).

To support the battery cell deals, Ford said it is direct sourcing battery cell raw materials as well, announcing deals to acquire most of the nickel needed through 2026 and beyond through agreements with Vale’s units in Canada and Indonesia, China’s Huayou Cobalt and BHP (from Nickel West in WA).