Ford Motor Co. is reportedly planning to import more reasonably priced lithium-iron or LFP batteries from Contemporary Amperex Technology Co. Limited (CATL) to make affordable SUVs and electric pickup trucks for consumers.
This strategy is a part of the U.S. automaker’s effort to overtake Tesla Inc., the current market leader in the worldwide EV industry. Sources claimed that Ford is also attempting to secure batteries and battery materials for the following decade by entering into multiple agreements with other battery manufacturers.
For those unaware, lithium-iron or LFP batteries have been gaining ground over the traditional lithium-ion (Li-ion) batteries, which are frequently used in electric vehicles. Notably, LFP batteries provide more energy density, higher working range, enhanced performance, and increased economic viability.
According to the Vice President of Ford Motors Lisa Drake, the automobile giant aims to source LFP batteries from a new 40 GWh manufacturing unit in North America by 2026. Although Drake didn’t specify whether CATL themselves will construct the factory as they are uncertain that all of these can be localized which is quite challenging.
Ford predicts that the integration of LFP batteries will allow the company to save 15% on costs, further enabling it to sell EVs for a lower price. Meanwhile, Tesla is currently selling some low-priced Model 3 sedans with LFP batteries in the U.S., while Rivian Automotive Inc. has also declared its plans to adopt LFP batteries.
Ford claimed that by 2026, its EV division which is currently unprofitable would generate pretax profit margins of 8%. Moreover, even an 8% profit would fall short of Tesla’s claimed operating margin of 14.6% for Q2 from the current year.
Interestingly, Ford wants to increase the number of electric vehicles it produces each year to 600,000 by the end of 2023 and over two million by the end of 2026. However, it projects that EV sales will grow 90% annually by 2026, almost double over anticipated industry growth rate.