By on August 31, 2020

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.]

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8 Comments on “Ford: Battery Plants Would be Pointless Right Now...”

  • avatar

    So the simple answer is to ensure your gigafactory isn’t limited to making batteries just for cars. How about manufacturing for Laptops as well and using the same batteries in a car, just like Tesla.

    If a big breakthrough does come along it may only be relevant for car makers.

  • avatar
    R Henry

    For all the bluster coming out of Dearborn the past 5 years about the Blue Oval’s electric initiatives, relying on outside vendors for batteries—the key component of the BEV, is playing small-ball.

  • avatar
    SCE to AUX

    “There’s no advantage in the ownership in terms of cost or sourcing.”

    Besides being factually untrue on both points, it means Ford really isn’t committed to EVs. If/when the Mach-E and F-150 EV sell in small numbers with high costs, Ford can simply back away from them and say the market has spoken.

    Ford’s statement is like when people declare that they don’t want higher income because they’d have to pay more taxes, but what they really mean is that they don’t want to work harder.

    • 0 avatar

      “Besides being factually untrue on both points, it means Ford really isn’t committed to EVs.”

      I don’t think that at all. I think they’re just playing it on the safe side at the moment. What if all of these manufacturers jumping on the EV bandwagon means a fast splitting of the slow growing piece of the EV pie? Ford can always build a battery factory in 5 years if it looks like Americans are adopting EV’s sooner than expected.

  • avatar

    Seems like the right approach to me. Ford can focus on cars, and let the battery experts do their thing. If a different battery manufacturer offers something better, Ford can source from them.

    • 0 avatar

      The danger is that they could end up at the mercy of their competitors. Tesla has their own lab. Toyota has a battery lab that leads in the number of solid-state battery patents. Hyundai and Kia have invested in battery labs. The auto companies own the technology and the battery makers just manufacture the cells according to specification. Tesla is in the process of transitioning to making their own. I suspect Toyota is in the process of doing the same. Ford could end up with a supply problem since the other manufacturers will prioritize their own production. Especially if there is a shortage.

      On the other hand, battery technology is moving so fast, by the time a battery plant is built, the equipment could be obsolete. It takes time to build a plant and the processes to build the next technology could totally change during the time the plant is under construction. Maybe it’s better to wait for a plateau in technology.

  • avatar

    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?]

  • avatar

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

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