Ford inks lithium deals to secure EV battery supply

Ford has struck a series of supply deals for lithium as it learns it needs to close a $7bn cost gap with its rivals to remain competitive.

The carmaker will work with established industry giants Albemarle and SQM as well as three developers to supply the silvery-white metal, a key material for batteries that power EVs.

The US carmaker also told people gathered for its investor event on Monday that its total costs were $7 billion higher than those of competitors, mostly due to vehicle complexity and “older” in its traditional engine-vehicle business “Ford Blue”. stemmed from inefficient” suppliers.

Ford Chief Executive Jim Farley said reducing costs was the company’s “biggest focus” and that the supply chain deals would provide carmakers with a “strategic” advantage as the industry prepares to increase sales of electric vehicles.

Lithium supply is one of the expected major bottlenecks in the rollout of electric vehicles as the mining and chemical processing industries struggle to meet a nearly fivefold increase in demand by 2030.

Lithium producers said the supply agreements should help Ford source enough raw materials from the US and free trade partner countries to obtain a $3,750 consumer tax credit under the Inflation Reduction Act. The maximum credit value is $7,500.

Ford’s lithium sourcing strategy represents more alignment with Washington’s goals for a US electric vehicle supply chain independent of China than its gambles on Chinese suppliers CATL and Huayou Cobalt for battery technology and nickel, respectively.

“With growing demand for EVs in the United States, our customers are seeking to regionalize their supply chains for greater safety, sustainability and lower costs,” said Eric Norris, president of Energy Storage at Albemarle.

Based on public disclosures by mining companies and Financial Times calculations, Ford could secure enough lithium to last around 1.1 million EV a year, assuming all projects manage to fully scale up on time and deliver consistently. Does Those calculations don’t include industry number two SQM and undisclosed amounts from EnergySource Minerals.

Albemarle, the world’s biggest lithium producer, said Monday it plans to supply Ford with 100,000 tons of lithium hydroxide for five years through the end of 2030, enough for a total of 3 million EVs.

Ford has had three supply deals with newcomers to the lithium market – EnergySource Minerals, Compass Minerals and Nemasca Lithium, a joint venture that includes US producer Livent and filed for bankruptcy protection four years ago – that delayed the project. comes with risks. ,

While Ford has struck down traditional supply agreements, rival General Motors has taken the extraordinary step of investing $650 million in US project developer Lithium Americas and making prepayments of nearly $200 million to Livent to secure battery raw materials.

Ford’s deals come after lithium jumped to nearly $32,000 a tonne after a four-month crash caused by a two-thirds drop in prices due to a weak EV market in China.

On overall group performance, Ford told investors it would reach a 10 percent profit margin for the company by 2026, with a “low double digit” margin from its internal combustion engine business and an 8 percent margin for its EV business, which currently has a negative 40 per cent margin and is expected to lose $3bn this year.

“We must convert our cost structure and capital efficiency into competitive advantage,” Ford Blue President Kumar Galhotra said on Monday. He added that by reducing the number of vehicle variations customers can buy, the company will spend less on both engineering and manufacturing.