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GM new Lordstown, OH battery plant and Ford's need for future battery packs

macchiaz-o

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https://fordauthority.com/2020/08/f...making-its-own/amp/?__twitter_impression=true

Ford Content Sourcing EV Batteries From Suppliers Instead Of Making Its Own
by Brett Foote, 7 hours ago

ch-E-in-Cyber-Orange-Metallic-Tri-Coat-002-758x521.jpg


At the moment, Ford is one of the few automakers that plans on sourcing its EV batteries from suppliers rather than making them itself. And even after facing a potential delay in Ford F-150 EV production due to a pending lawsuit against its battery-maker SK Innovation, that position isn’t apparently going to change anytime soon, as outgoing Ford CEO Jim Hackett revealed on The Blue Oval’s recent second-quarter earnings call.

Ford-F-150-EV-Prototype-005-1024x768.jpg


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

It’s an interesting stance, especially given the fact that Tesla invested $5 billion in its new lithium ion battery factory, while General Motors has also broken ground on a $2.3 billion Ohio plant in a joint venture with LG Chem to produce EV batteries. Meanwhile, Ford’s new partner Volkswagen and fellow German automaker Daimler have also invested in battery production facilities recently.

2021-Ford-Mustang-Mach-E-Exterior-001-1024x682.jpg


Ford’s issue with such an investment relates to scale, as FoMoCo’s head of product development and purchasing, Hau Thai-Tang, revealed in a recent analyst call. “We don’t have that volume initially to justify that capital expenditure,” he said. “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.”

Thai-Tang noted that Ford would have to produce 100,000-150,000 EVs each year to justify the cost of building its own battery plant. Such a move would also cause problems when battery technology inevitably reaches a new breakthrough point, or if customer demand for electric vehicles falters in the future.

irst-Edition-Carbonized-Gray-Exterior-004-1024x576.jpg


“It gives us the ability to access the latest technology and innovation across multiple suppliers,” Thai-Tang said. “So I know exactly what the state of the art is from the Korean suppliers, the Japanese suppliers, the Chinese suppliers, and I’m able to compare notes across them maybe better than they can. And then, of course, we have the competitive tension with dealing with multiple suppliers, which allows us to drive the cost down.”

Thai-Tang also pointed to Toyota as a cautionary tale of what happens when an automaker invests heavily in one type of battery. “They invested to vertically integrate nickel-metal hydride batteries for their hybrids. And after spending over $1 billion to do that, the technology shifted to lithium ion, and they were among the last to switch over. I don’t want to put Ford in that position.”
 

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https://fordauthority.com/2020/08/f...making-its-own/amp/?__twitter_impression=true

Ford Content Sourcing EV Batteries From Suppliers Instead Of Making Its Own
by Brett Foote, 7 hours ago

ch-E-in-Cyber-Orange-Metallic-Tri-Coat-002-758x521.jpg


At the moment, Ford is one of the few automakers that plans on sourcing its EV batteries from suppliers rather than making them itself. And even after facing a potential delay in Ford F-150 EV production due to a pending lawsuit against its battery-maker SK Innovation, that position isn’t apparently going to change anytime soon, as outgoing Ford CEO Jim Hackett revealed on The Blue Oval’s recent second-quarter earnings call.

Ford-F-150-EV-Prototype-005-1024x768.jpg


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

It’s an interesting stance, especially given the fact that Tesla invested $5 billion in its new lithium ion battery factory, while General Motors has also broken ground on a $2.3 billion Ohio plant in a joint venture with LG Chem to produce EV batteries. Meanwhile, Ford’s new partner Volkswagen and fellow German automaker Daimler have also invested in battery production facilities recently.

2021-Ford-Mustang-Mach-E-Exterior-001-1024x682.jpg


Ford’s issue with such an investment relates to scale, as FoMoCo’s head of product development and purchasing, Hau Thai-Tang, revealed in a recent analyst call. “We don’t have that volume initially to justify that capital expenditure,” he said. “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.”

Thai-Tang noted that Ford would have to produce 100,000-150,000 EVs each year to justify the cost of building its own battery plant. Such a move would also cause problems when battery technology inevitably reaches a new breakthrough point, or if customer demand for electric vehicles falters in the future.

irst-Edition-Carbonized-Gray-Exterior-004-1024x576.jpg


“It gives us the ability to access the latest technology and innovation across multiple suppliers,” Thai-Tang said. “So I know exactly what the state of the art is from the Korean suppliers, the Japanese suppliers, the Chinese suppliers, and I’m able to compare notes across them maybe better than they can. And then, of course, we have the competitive tension with dealing with multiple suppliers, which allows us to drive the cost down.”

Thai-Tang also pointed to Toyota as a cautionary tale of what happens when an automaker invests heavily in one type of battery. “They invested to vertically integrate nickel-metal hydride batteries for their hybrids. And after spending over $1 billion to do that, the technology shifted to lithium ion, and they were among the last to switch over. I don’t want to put Ford in that position.”
Add to that the fact that Ford might have a hard time coming up with the money required for a new multi-billion dollar investment right now. They would either need to dilute share value or displace development funds (also likely to dilute share value).
 

dbsb3233

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

It’s an interesting stance, especially given the fact that Tesla invested $5 billion in its new lithium ion battery factory, while General Motors has also broken ground on a $2.3 billion Ohio plant in a joint venture with LG Chem to produce EV batteries. Meanwhile, Ford’s new partner Volkswagen and fellow German automaker Daimler have also invested in battery production facilities recently

Ford’s issue with such an investment relates to scale, as FoMoCo’s head of product development and purchasing, Hau Thai-Tang, revealed in a recent analyst call. “We don’t have that volume initially to justify that capital expenditure,” he said. “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.”

Thai-Tang noted that Ford would have to produce 100,000-150,000 EVs each year to justify the cost of building its own battery plant. Such a move would also cause problems when battery technology inevitably reaches a new breakthrough point, or if customer demand for electric vehicles falters in the future.

“It gives us the ability to access the latest technology and innovation across multiple suppliers,” Thai-Tang said. “So I know exactly what the state of the art is from the Korean suppliers, the Japanese suppliers, the Chinese suppliers, and I’m able to compare notes across them maybe better than they can. And then, of course, we have the competitive tension with dealing with multiple suppliers, which allows us to drive the cost down.”

Thai-Tang also pointed to Toyota as a cautionary tale of what happens when an automaker invests heavily in one type of battery. “They invested to vertically integrate nickel-metal hydride batteries for their hybrids. And after spending over $1 billion to do that, the technology shifted to lithium ion, and they were among the last to switch over. I don’t want to put Ford in that position.”
Those are some of the exact points I speculated on earlier. 5 years ago it was a different story. But now there's SO much 3rd party battery production coming online in the next 3-5 years that it probably makes more sense to not lock in a ton of investment for their own. They can be more nimble that way, play suppliers against each other, and are free to buy the latest and best without prematurely discarding sunk investment if designs and the manufacturing process improves.

Plus I think there's a real chance battery manufacturers may be overshooting the mark here on consumer demand for BEVs (one side of the pendulum swing to the other). If so, Ford should be able to get batteries cheaper than those with sunk in-house costs.
 

GoGoGadgetMachE

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Those are some of the exact points I speculated on earlier. 5 years ago it was a different story. But now there's SO much 3rd party battery production coming online in the next 3-5 years that it probably makes more sense to not lock in a ton of investment for their own. They can be more nimble that way, play suppliers against each other, and are free to buy the latest and best without prematurely discarding sunk investment if designs and the manufacturing process improves.

Plus I think there's a real chance battery manufacturers may be overshooting the mark here on consumer demand for BEVs (one side of the pendulum swing to the other). If so, Ford should be able to get batteries cheaper than those with sunk in-house costs.
Yeah, as much as I want to fault Ford as an owner, and a shareholder, and someone living in a place where they are an important employer, I can't really fault them for not jumping into battery production right now. Things are just moving too fast in the space.
 



 









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