Ford Motor (NYSE:F) will invest $2.5 billion to $3.5 billion into a new Michigan battery plant, partnering with China’s Contemporary Amperex Technology, known as CATL. The announcement has yet to move F stock.
Ford opened Feb. 13 at $12.74 per share with a market capitalization of $50.7 billion. Since the start of 2023 the shares are up about 10%. The company recently reported a loss of nearly $2 billion, or 49 cents per share, on revenue of $158 billion for 2022.
Iron Phosphate
CATL is the largest producer of lithium ion batteries in the world, with a 37% market share. Batteries have proven to be the key bottleneck to mass production of electric cars.
The new plant will be in Marshall, 108 miles west of Detroit. It will eventually employ 2,500 workers.
The Ford-CATL plant is expected to make batteries of lithium iron phosphate. Iron phosphate batteries are more stable than traditional lithium ion and are said to be less expensive to make. The downside is they have less energy density.
This is the second battery supplier now tied to Ford. The company already had supply contracts with SK Innovation of Korea, the fifth-largest global battery supplier. The two companies broke ground on a Kentucky battery plant in December.
Virginia had been in line to get the CATL plant. But Governor Glenn Youngkin rejected it because the China-based partner would be the operator. Ford will own the land and the Michigan plant.
Several car companies that produce electric vehicles are looking to mass produce batteries to take on Tesla (NASDAQ:TSLA), whose market lead is closely tied to its success in mass production. CATL also supplies Tesla, Volkswagen (OTCMKTS:VWAGY) and leading car makers in China. It needs plants located in the U.S., however, to qualify for U.S. tax credits.
What Happens Next for F Stock?
It will take time for Ford’s plants to get into production, meaning it will take time for Ford to achieve mass production in electric cars. But the announcement means production will come.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
