CATL to land, but not to own its first EV battery plant in the US - PingWest

CATL to land, but not to own its first EV battery plant in the US

CATL to land, but not to own its first EV battery plant in the US

Rebbeca Ren

posted on 4 hours ago

The new factory will be 100% owned by Ford, and CATL will only license its battery technology and services.

After much resistance, Chinese EV battery maker CATL's plan to build an EV battery factory in the US has finally been settled.

On Monday, Ford Motor Co. announced that it will build a battery plant in Michigan with CATL, or Contemporary Amperex Technologies Ltd., but the partnership will work in an irregular way.

The new facility will be built in Marshall, a small rural town about 100 miles west of Detroit, and Ford will own 100 percent of it, with CATL providing only battery technology and services.

It’s worth noting that Michigan is making concerted efforts to become the nation's battery manufacturing hub. Last year, the state attracted over $14 billion in electric vehicle and battery investments. In October, the local government approved a proposal by Gotion High-Tech, China's third-largest electric vehicle battery maker, to construct a $2.4 billion facility.

Under the arrangement, Ford will manufacture the battery cells using LFP battery cell knowledge and services provided by CATL, Ford said in its news release. “This will help us build more EVs faster,” William Clay Ford Jr., the company’s executive chairman, said on Monday. He added that CATL would “help us get up to speed so we can build the batteries ourselves.”

In March last year, as part of its North American market expansion plan, CATL reportedly proposed to invest in plants in northern Mexico, South Carolina, or Kentucky. However, since the US imposed tough new restrictions on the sourcing of materials used in EV batteries in late August, the company has slowed the process of vetting sites for potential new plants in the region.

The new restrictions are part of the Inflation Reduction Act (IRA), which was signed into law by the Biden Administration in August and aims to reduce emissions and promote green technology. The IRA requires automakers to have 50% of critical minerals used in EV batteries sourced from North America or US allies by 2024, rising to 80% by the end of 2026.

According to a Reuters report in October, the rules would raise the cost of manufacturing batteries in the US to a higher level than shipping them from China, which is part of the reason why the company has slowed down its investment plans.

The plan was brought back into the spotlight in December: Ford proposed to build a battery plant in Michigan or Virginia with CATL, expecting to receive tax benefits without touching on politically sensitive issues between China and the US. This is also when the unusual ownership structure of the new facility was first brought out.

But soon after, Virginia Governor Glenn Youngkin, a potential Republican candidate for US President in 2024, rejected the $3.6 billion investment that could create about 2,500 jobs out of concern over CATL's Chinese roots.

Therefore, the opportunity fell into Michigan’s hands. According to Ford, the plant would be able to produce enough batteries for 400,000 electric vehicles a year. CATL will provide Ford with lithium iron phosphate batteries before the new plant goes into production.

By keeping CATL out of the money and only licensing the technology, the risks that geopolitical conflict may pose to the new plant could be reduced. In addition, the US automaker said its contract with CATL includes provisions to work through difficulties that arise between the two countries.

CATL ranks first in the world by installed battery capacity in 2022, according to South Korean firm SNE Research. The Ningde-based company has held the top spot on the global market for EV batteries for six consecutive years and shows no signs of slowing down based on 2022 projections, said the report.

With CATL's assistance, Ford, the No. 2 electric car maker, could gain more ground in the power cell supply chain and narrow the gap with Tesla.

The cooperation is also part of Ford's efforts to join the onshore EV manufacturing boom. In recent years, the US government has committed to increasing EV-related domestic production, with automakers and suppliers breaking ground on battery factories across the country.

For instance, General Motors recently began production at an Ohio battery plant co-owned with LG Energy Solutions; Ford is constructing two battery plants in Kentucky and a third in Tennessee, both in collaboration with SK On; and LG Energy Solutions is constructing two additional plants in Tennessee and Michigan.

According to SNE Research, the global power battery market had continued to grow, with battery consumption in 2023 expected to be about 749 GWh.