The US Department of Energy has draughted the single largest loan in the DOE’s Office for automaker Ford Motors to build three EV battery plants. Ford’s $9.2 billion loan will produce batteries for future Lincoln and Ford vehicles as the car manufacturer aims to boost US’ EV battery capacity. Ford’s Department of Energy loan will also help the US attain net zero electricity by 2035 and transform half of all new car sales to EVs by 2030.
According to Bloomberg, Ford’s $9.2 billion loan is by far the largest since the US auto bailout that was spurred by the global financial crisis of 2008. Ford’s loan for the three new EV battery plants will be utilized in collaboration with the South Korean-based EV battery manufacturer SK Innovation.
Ford’s $9.2 Billion Loan For EV Battery Plants
“The biggest thing of scaling is EV batteries”, said Ford CEO Jim Farley in an interview in March.
Ford’s $9.2B loan is inclined to expand EV battery production in the US, in an attempt to build a resilient domestic supply chain to reduce the country’s dependence on China.
The automaker had unveiled plans of developing the ‘largest, most efficient, and most advanced auto complex’ in 2021, named BlueOval City. Ford’s Department of Energy loan will be consistent with this goal as it strengthens its ties with SK Innovation.
Of the three EV battery plants, one is scheduled to be built at a nearly 6-square-mile site in West Tennessee paired along with an assembly plant while the other two will be located at Central Kentucky’s BlueOvalSK Battery Park.
“The DOE’s commitment to Ford’s EV battery plants will strengthen battery manufacturing in the US and reduce carbon emissions. BlueOval SK and Ford are expanding demand for the batteries and the exciting line-up of vehicles they will power.”
– Dr. Robert Rhee, CEO, BlueOval SK
The production in Ford’s EV battery plants is slated to begin in 2025. The automaker has envisioned producing 2 million EVs annually by 2026, in contrast to the 132,000 manufactured in 2022. Furthermore, in tandem with the planned EV production ramp, Ford anticipates the three battery plants to generate 129 GWh of battery cells every year.
Ford’s Loan For US EV Battery Capacity
Ford will be creating 7,500 employment opportunities with the three new EV battery factories.
The Inflation Reduction Act (IRA) has empowered US automakers to throw their hats in the ring, as they are backed to compete in the global auto industry. The auto industry’s perspective shift towards a fully electric future will curtail GHG emissions drastically in half by 2030.
Ford’s $9.2 billion loan has arrived at a pivotal point in the automaker’s EV ramp-up. This year, Ford split its business into three segments to play on the strengths of each individual segment to engender success. The American automaker’s Model e (EV) division is slated to lose a staggering $3 billion this year for scaling production. Things are expected to turn around as Ford expects an 8 percent EBIT margin for the same unit.
IRA was passed in August 2022 and since then, the Loans Programs Office (LPO) has churned out $400 billion. Created in 2005 for augmenting clean energy projects, the LPO has lent nearly $33 billion over its 14-year run. Its most prominent loan of $465 million in 2010 helped Tesla accelerate production at its first factory in Fremont, California. The LPO also issued a $2.5 billion loan to General Motors (GM) last year.
On completion of Ford’s EV battery plants, all of the automaker’s EV models including the new electric truck under the moniker of Project T3 will be eligible for IRA’s incentives of $7,500 tax credit. At present, Ford’s only EV model qualified for the full tax credit is the Ford F-150 Lightning, while Ford’s E-transit and Mustang Mach-E qualify for $3,750.