Ford Motor Co. has announced that it will resume work on its electric vehicle battery plant in Marshall, but on a smaller scale than initially planned. The decision comes as growth in electric vehicle demand is progressing slower than expected. The automaker will reduce its expected gigawatt capacity for the project by approximately 43% and decrease the number of jobs created through the investment by about 32%, resulting in a total of 1,700 jobs. Construction is still scheduled to be completed by 2026.
The scaled-back plans for the Marshall project reflect the challenges faced by the electric vehicle industry. Issues such as range, infrastructure, and pricing have hindered the mass adoption of electric vehicles. Additionally, new labor agreements have led to increased labor costs for the Detroit Three automakers, while high interest rates have affected new vehicle sales overall.
Stephanie Brinley, the principal automotive analyst for the Americas at S&P Global Inc., explained that the demand for electric vehicles is growing but at a slower pace than previously indicated. Automakers must carefully balance their investments to avoid overinvesting in facilities that may not be fully utilized or underinvesting and being unprepared to meet future demand.
Ford paused the project due to national contract talks with the United Auto Workers and a strike. The company evaluated several factors, including demand, expected electric vehicle growth, product cycle plans, labor costs, and affordability, to determine the best path forward.
Mark Truby, chief communications officer for Ford, confirmed that the company will proceed with the project but on a slightly smaller scale. Despite the reduction in size and scope, Governor Gretchen Whitmer stated that Michigan remains committed to Ford and sees the project as a positive boost for the economy.
The Marshall project, known as BlueOval Battery Park Michigan, will see a decrease in gigawatt capacity from the initial plan of 35 gigawatt-hours to 20 GWh. The number of jobs created will also be reduced from the projected 2,500.
The decrease in gigawatt capacity will likely lead to a proportional reduction in the number of electric vehicles produced at the site and the initial projected investment of $3.5 billion. It is still uncertain how the changes will affect the overall acreage of the project or the state subsidy for the project. Ford is in discussions with the Michigan Economic Development Corp. about the possibility of adjusting the subsidy agreement.
While the decrease in subsidies is expected, Ford’s decision to move forward with the project received support from the Michigan Economic Development Corp. The agency emphasized the importance of securing Michigan’s position as a global leader in mobility and advanced manufacturing.
The decision to scale back the Marshall project aligns with the overall slowdown in electric vehicle adoption. Ford and other automakers have reduced investments, launches, and related programs for electric vehicles due to consumer concerns about range, charging infrastructure, and electric grid performance.
Ford recently announced a $12 billion reduction in electric vehicle investments, which includes the revised plans for the Marshall plant. The company’s Model e EV business unit reported a loss of $1.3 billion in the third quarter.
Ford has also delayed the launch of one of its joint-venture battery plants in Kentucky and reduced production of the Mustang Mach-E SUV in Mexico. The company has cut prices for its electric F-150 Lightning trucks and made adjustments to its EV certification sales program for dealers.
The company’s agreement with the United Auto Workers has led to higher labor costs, with the new contract including wage increases and other benefits for employees. Ford estimates that the deal will add $850 to $900 in costs per vehicle but hopes to absorb this through improved efficiencies.
Despite the challenges and adjustments, Ford’s plans for the Marshall project highlight the importance of expanding electric vehicle production. The company will continue to work with China-based battery maker Contemporary Amperex Technology Co. Ltd. (CATL) to license battery technology. LFP batteries, which will be produced at the Marshall facility, offer cost advantages and safety benefits compared to other battery types.
Sam Abuelsamid, a principal e-mobility analyst, stated that increasing LFP battery capacity is crucial for reducing the cost of electric vehicles. Ford has the option to scale up production in the future if demand requires it.
Ford is not the only automaker partnering with CATL. Stellantis NV recently announced a non-binding agreement with the battery maker for the local supply of LFP battery cells and modules in Europe. The companies are considering a joint venture to further their collaboration.
In summary, Ford’s decision to resume work on its electric vehicle battery plant in Marshall on a smaller scale reflects slower-than-expected growth in electric vehicle demand. The automotive industry is facing challenges such as range limitations, infrastructure concerns, and pricing barriers. Ford’s scaled-back plans and the reduction in jobs created are a reflection of the current industry landscape. Despite the adjustments, Ford remains committed to expanding electric vehicle production and aims to meet future demand.