The epoch-making cooperation of USA battery manufacturing plant between Ford and CATL

By Jeff Lee / Mike Song 2022-12-23

In the face of the upcoming BEV era, the power battery that accounts for about 40% of the vehicle cost will absolutely be the hotly contested center. Due to the lack of the R&D capacity and the stable supply chain of batteries, the traditional carmakers turned to seek cooperation or partnership with major battery manufacturers, which results in subtle change of market influence in between. The cooperation between Ford and CATL implies that the huge business benefits had overrode the political situation between the two countries; I believed that there will be more transnational cooperation between the two greats in automotive industry - China and USA, which won’t be just for batteries, but also chips, the autonomous driving technologies, or even the connected services of the low orbit satellites.

At the moment when the relationship between the two greats – USA and China is deteriorating, the cooperation in the world of BEVs is in progress by contrast. According to a report, Ford will cooperate with the globally-leading power battery manufacturer – CATL to establish power battery manufacturing factory in Michigan or Virginia. The billion dollars investment for the establishment will be 100% funded by Ford, and CATL will be in charge of the implementation of technologies and the operation but not the investment. With this unique approach of cooperation, this factory will avoid any sensitive issues between the two countries, and enjoy all of the tax incentives of the Inflation Reduction Acts announced by the US government in August (according to the Act, the power battery of BEVs must be produced out of at least 50% components and materials made or assembled in North America from 2023, so to enjoy the US$ 3,750 of tax incentives. The requirement of local content rate of raw materials is regulated to increase year by year until 2029 with 100%). This factory will produce LFP batteries to supply the demand of the production of Ford BEVs. In addition, Ford also cooperates with the South Korean SK On to build a battery factory in USA. Another major carmaker – GM chose to cooperate with the South Korean LG Chem. These cooperation cases are obviously decided in consideration of the tax incentives of IRA on the factories locations. For instance, CATL originally considered to solely establish battery manufacturing factory in Mexico with lower operation cost to supply the demand of carmakers in USA; However, the tax incentive of IRA is up to US$ 35 / kWh, so they turned to cooperate with Ford to establish the factory in USA. This cooperation will provide 70% of the 2 million units of BEVs to be produced by Ford from 2026, which means most of the BEVs produced by Ford in the future will rely on the battery technology from China.

To view from the cooperation of the battery manufacturing factory between Ford and CATL, we can clearly understand that the discourse of power in the futuristic era of BEVs won’t belong to only carmakers anymore, but major battery manufacturers will be another key to influence the car market competition. Professional battery manufacturers that enter the automotive industry around the world including CATL, LG, SK, and Panasonic, will undoubtedly be the giants in automotive industry on par with major Tier One suppliers in the era of ICE cars including Bosch, Continental, Denso, etc., In addition, most of the production capacity of the current 2nd largest company in the global battery industry – BYD, are for their own BEV production, and some of the capacity is for Tesla and Toyota. To sum up, it’s more like that batteries made in China might dominate the global BEV industry than that Chinese self-owned BEV brands will have significant positions in the global car market. Moreover, in Taiwan, we also own a complete upstream material supply chain of battery. It will absolutely be a major issue for grasping business opportunities of intelligent BEVs for our industries, the authorities, the academia, and the research institute, to integrate the resources to build domestic power batteries with high price-performance ratio!