Ford contracts with lithium stores to provide batteries for electric vehicles
Ford has struck a series of lithium supply deals as it reveals it needs to close a $7 billion cost gap with rivals to stay competitive.
The automaker will partner with established industry giants Albemarle and SQM, as well as three developers, to supply the silver-white metal, a critical material for the batteries that power electric vehicles.
The U.S. automaker also told those gathered at its investor event on Monday that its total costs are $7 billion higher than those of its competitors, mainly due to the complexity of the vehicles and “chronically inefficient” suppliers to the traditional Ford Blue motor vehicle business.
Ford CEO Jim Farley said cost-cutting was the company’s “biggest focus” and the supply chain deals offered automakers “strategic” benefits as the industry prepares to boost sales of electric vehicles.
Lithium supply is one of the key bottlenecks in EV adoption as the mining and chemical processing industries struggle to meet a nearly five-fold increase in demand by 2030.
Lithium producers say the supply agreements should help Ford get enough raw materials from the U.S. and free-trade partners to meet the Consumer Tax Credit threshold of $3,750 under the Inflation Reduction Act. The maximum loan amount is $7,500.
Ford’s lithium procurement strategy is more in line with Washington’s goals for a US electric vehicle supply chain independent of China than its gamble on Chinese battery technology and nickel suppliers CATL and Huayou Cobalt.
“As the demand for electric vehicles increases in the United States, our customers are looking to regionalize their supply chain for greater safety, sustainability and lower costs,” said Eric Norris, president of Albemarle Energy Storage.
Based on public disclosures by the mining companies and calculations by the Financial Times, Ford could supply enough lithium for almost 1.1 million electric vehicles a year, assuming each project is fully scaled up on time and delivered consistently. These calculations do not take into account the industry’s number two SQM and EnergySource Minerals undisclosed volumes.
Albemarle, the world’s largest lithium producer, said on Monday it plans to supply Ford with 100,000 tonnes of lithium hydroxide over five years until the end of 2030, enough for a total of 3 million electric vehicles.
Three of Ford’s supply deals are with lithium newcomers — EnergySource Minerals, Compass Minerals and Nemaska Lithium, a joint venture that includes U.S. producer Livent and filed for bankruptcy protection four years ago — which carry the risk of project delays . .
While Ford struck traditional supply agreements, rival General Motors took the extraordinary step of pledging to invest $650 million in Lithium Americas, a US project developer, and pay Livent nearly $200 million up front to secure battery raw materials.
Ford’s deals come after the price of lithium jumped to about $32,000 a tonne after a four-month crash that cut prices by two-thirds due to weakness in China’s electric vehicle market.
On the group’s overall performance, Ford told investors it expects to reach a 10 percent profit margin for the company by 2026, with “low double-digit” profit margins for its internal combustion engine business and 8 percent profit margins for its current electric vehicle business. negative 40 percent margin and expected to lose $3 billion this year.
“We need to turn our cost structure and capital efficiency into a competitive advantage,” Ford Blue President Kumar Galhotra said Monday. He noted that reducing the number of vehicle variants available to customers would mean the company would spend less on both design and manufacturing.