Ford To Build $3.5 Billion Lithium Iron Phosphate Battery Plant In Michigan Using CATL Technology

Ford today announced a plan to build a $3.5 billion factory in Marshall, Michigan to produce 35 GWh of lithium iron phosphate (LFP) cells for electric vehicles from 2026. Ford already announced plans to start using LFP batteries in the Mustang Mach-E from mid-2023 and F-150 Lightning from early 2024. However, those batteries will be sourced from CATL in China, the leading cell manufacturer in the world and one of the leaders in LFP production. Ford will license CATL technology but it will own the new factory and operate it, rather than creating a joint venture.

While Ford will start using CATL LFP batteries later this year, shipping them from China won’t help the company reach its sustainability goals. Batteries are heavy and bulky and the emissions associated with shipping them halfway around the world will significantly cut into the gains from eliminating the tailpipe from these vehicles. Those vehicles also will not qualify for any clean vehicle tax credits.

This is why Ford and other OEMs are moving so aggressively to localize battery production to wherever vehicles are built and sold. Ford previously announced a joint venture with Korea’s SK ON for three cell plants in Kentucky and Tennessee that are already well under construction. Those plants will produce nickel manganese cobalt (NMC) cells.

Nickel-rich cell chemistries such as NMC (also referred to as NCM), nickel-manganese-cobalt aluminum (NMCA, which GM uses for its Ultium cells), nickel-cobalt-aluminum (NCA, which Tesla uses) have a higher energy density than LFP. However, Nickel and cobalt are much more expensive than iron and phosphorus and also more volatile. When there is an internal short circuit in a nickel-rich cell, it is much more likely to experience thermal runaway. LFP cells are inherently more stable and are nearly impossible to experience thermal runaway or fires.

Despite LFP having a lower energy density than nickel-rich cells, much of that can be offset by adopting cell-to-pack or structural battery pack designs rather than the modular designs that are typical today. In addition to lower cost, LFP cells have much longer charge cycle lifetimes. A typical nickel cell can do between 500 and 1,000 charge cycles before it loses enough capacity to no longer be useful in a vehicle. LFP cells can withstand thousands of cycles and some manufacturers, including CATL, have claimed EVs with LFP can go 1 million miles.

The added stability of LFP cells means that they are better able to withstand charging all the way to 100% without degrading. Nickel-rich cells typically have to leave a buffer that is unused to prevent overcharging. Thus some of the energy density disadvantages can be safely recovered.

The decision to structure the new operation as a wholly owned subsidiary of Ford rather than a joint venture is likely driven in part by the content requirements in the Inflation Reduction Act. Since China is a foreign entity of concern, batteries and materials from that country do not qualify for clean vehicle credits. Thus the Mach-E and Lightning with Chinese-sourced batteries won’t be eligible. Limiting the equity stake of CATL in this deal and only licensing some technology along with local sourcing of most materials will probably enable Ford to claim its cells meet the domestic content requirements.

“This is how we look at the recipe to create one of the lowest cost, US-produced batteries when this plant comes online in 2026 and this helps us contribute to Ford’s goal of an 8% Model E EBIT in 2026,” said Lisa Drake, Ford VP of EV industrialization. “It strengthens our domestic supply chain and helps us ramp production, getting more EVs to more customers sooner.”

As with the Mach-E and Lightning, the new LFP batteries will likely be used mainly in standard range and lower cost EVs and many of the commercial vehicles Ford sells. Most of those commercial vehicles, such as Transit vans used for everything from last-mile deliveries to plumbers and electricians, rarely go outside of a limited geographical area and don’t need more than 100 miles of range. With more availability of domestic LFP batteries, future electric versions of vehicles like the compact Maverick pickup and Escape crossover are likely at prices that more consumers can afford.

The Marshall plant will employ about 2,500 new employees and provide enough battery cells for about 400,000 electric vehicles annually.