Ford: Battery Plants Would Be Pointless Right Now

Matt Posky
by Matt Posky

If electric vehicles are ever to supplant the tried-and-true gasoline-driven automobile, we’ll need to make a lot of changes. Infrastructure will need to tailor itself to electric driving by implementing more charging stations while bolstering the electrical grid with more power plants and a higher capacity for energy storage. But auto manufacturers will also need to manufacture them at a scale that will adequately feed society, requiring more capable machines — and the batteries they’ll be dependent upon.

While most large automakers have dumped billions into R&D for “mobility projects,” including items pertaining directly toward advancing EVs, their approaches have varied. Some manufacturers (e.g. Tesla) built battery plants to support themselves, others are contented with having made deals with suppliers. Ford has officially taken the latter approach, according to its own leadership.

Citing outgoing Ford CEO Jim Hackett during the company’s second-quarter earnings call, Automotive News helped make the brand’s strategy a bit clearer.

“The supply chain has ramped up since Elon [Musk] built his Gigafactory, and so there’s plenty there that does not warrant us to migrate our capital into owning our own factory,” he said. “There’s no advantage in the ownership in terms of cost or sourcing.”

From AN:

The divergent strategies have huge financial implications. Tesla’s stock jumped last week after CEO Musk hinted that the automaker would reveal improved battery capacity in September. Wall Street analysts have spoken glowingly about GM’s Ultium technology and its potential to support a spinoff EV business.

Sam Abuelsamid, a principal e-mobility analyst at Guidehouse Insights, says both strategies have advantages.

“I don’t know that there is a definitively better path,” he said. “If you source your own, you’ll have a guaranteed supply, but you’re potentially stuck with that supply if you can’t sell them. If you source from suppliers, if there’s a technology breakthrough, you’ve left yourself flexibility and haven’t made a big investment in something that may be prematurely obsolete. It’s a bit of a crapshoot either way you go.”

By not bothering to build an extravagantly priced battery production facility, Ford may actually find itself in a better situation than its peers when the next major technological breakthrough occurs. Yet it could lag behind them if EV demand balloons over the next couple of years. Ford is prioritizing electrics and making plenty of noise about its Mach-E crossover, but it’s also pursuing a mixed approach to vehicle production by attempting to scale down internal combustion powertrains and modifying its fleet to include more hybrids.

In contrast, Volkswagen is more focused on converting its lineup to become entirely dependent on electricity, and will soon offer up that technology to the Blue Oval thanks to a previously established EV partnership. That means VW can take additional risks by betting the farm on electric cars while Ford takes a more mixed approach. Of course, Ford doesn’t get to enjoy the same preferred treatment on Wall Street now that the stock exchange has decided anything that can be construed (or, sometimes misconstrued) as environmentally friendly deserves to have truckloads of money blindly thrown at it.

Still, what works with investors may not play well with customers. General Motors has committed to transforming Cadillac into a luxury EV brand, which seems like a colossal risk for it to take. Granted, the transition only happens if GM feels there is sufficient demand, but that may still leave the brand with a confusingly lineup of vehicles. Hasn’t Cadillac’s identity been muddled enough already?

Ford doesn’t think EV demand will be strong enough to warrant total commitment.

“We don’t have that volume initially to justify that capital expenditure,” Hau Thai-Tang, Ford’s head of product development and purchasing, told analysts earlier this month. “There’s insufficient scale for any one OEM, other than somebody who’s a full-line battery-electric manufacturer like Tesla, to justify that spending.”

He also noted that content requirements in North America and China further complicate the issue, and that Ford would need to sell somewhere between 100,000 to 150,000 EVs annually to rationalize building its own battery factory. However, we’re under the assumption that its more of a cost issue than a supply factor. Volkswagen Group has encountered problems in getting enough power cells for its first round of EVs, despite having just cut its teeth on the segment. And Ford has already stated it will probably have to limit sales of the Mustang Mach-E in its first year specifically because it might not be able to source enough batteries.

[Image: Ford Motor Co.]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • ToolGuy ToolGuy on Sep 01, 2020

    Non-automotive consumer battery progress check (August 2020): Ordered some off-brand Bluetooth folding over-the-ear headphones - the audio quality is 'good enough' for the noisy gym. A 4-6 hour charge of the batteries yields something like *100 hours* of playing time. Cost: A whopping twenty-five bucks, shipped. If I lose them, so what. If they break, who cares. (Progress.) [Drop these in the time machine and deliver them to the mid-1980's (when my Sony Walkman WM-10 was cutting-edge) and I'd be like whaaaaaaaat?]

  • HotPotato HotPotato on Sep 03, 2020

    So, Ford is not serious about the future, and is positioning itself to be purchased by VW. Makes sense.

  • 3-On-The-Tree Alan, I was an Apache pilot and after my second back surgery I was medically boarded off of flying status due to vibrations, climbing on and off aircraft, so I was given the choice of getting out or re-branching so I switched to Military Intel. Yes your right if you can’t perform your out doesn’t matter if your at 17 years. Dad always said your just a number, he was a retired command master chief 25 years.
  • ToolGuy "Note that those vehicles are in direct competition with models Rivian sells"• I predict that we are about to hear why this statement may not be exactly true
  • ToolGuy From the relevant Haynes Repair Manual:"Caution: The 4.6L models require a special tool to extract the water pump from the coolant crossover housing. This special tool is expensive and the removal procedure is difficult. Have the water pump replaced by a dealer service department or other qualified automotive repair facility if the tool is not available."One version of the tool is Lisle 14440; I paid $10.82 (less 5% discount, plus shipping).You can see why I never attempt my own maintenance or repairs. 😉
  • Dave M. IMO this was the last of the solidly built MBs. Yes, they had the environmentally friendly disintegrating wiring harness, but besides that the mechanicals are pretty solid. I just bought my "forever" car (last new daily driver that'll ease me into retirement), but a 2015-16 E Class sedan is on my bucket list for future purchase. Beautiful design....
  • Rochester After years of self-driving being in the news, I still don't understand the psychology behind it. Not only don't I want this, but I find the idea absurd.