Ford hitting Korea to secure subsidy-compliant batteries as it faces unprecedented F-150 Lightning demand

The runaway sales success of the Ford F-150 Lightning electric truck coupled with the upcoming new EV subsidy requirements for local battery material production and assembly have placed Ford in a bind. Its Chairman Bill Ford will be visiting Korea to try and expand the battery production joint venture with SK On and probe other cell makers like LG, reports local media.

Ford will lean on SK On to enlarge their Blue Oval partnership which already has battery factories planned for Kentucky and Tennessee with 17 production lines that will be rated for 43 GWh each in annual battery capacity. SK On is also focused on the expansion of its existing battery plants in the US, Europe, and China, so it may be reluctant to take on more manufacturing work hence Bill Ford's two-pronged visit.

The other goal that Ford's Chairman may be pursuing during its meetings in Korea, is to negotiate supply of batteries which are made in compliance with the new Inflation Reduction Act EV subsidy requirements:

• To qualify for the first $3,750 credit, a percentage of the value of applicable critical minerals contained in a vehicle’s batteries must be extracted or processed in the US or in a country with which the US has a free trade agreement or must have been recycled in North America. Applicable percentages increase from 40 percent prior to 2024, to 80 percent after 2026. Qualifying critical minerals include aluminum, cobalt, lithium, nickel, and graphite, among others.
• To qualify for the second $3,750 credit, a certain percentage of the value of the battery components in an EV must be manufactured or assembled in North America; applicable percentages increase from 50 percent prior to 2024 to 100 percent after 2028.
• Further, after calendar year 2024, a clean vehicle will not qualify for the tax credit if it contains any critical minerals that were “extracted, processed, or recycled by a foreign entity of concern” – including companies owned by, controlled by or subject to the jurisdiction of the government of the People’s Republic of China.
• After December 31, 2023, a vehicle may not qualify for the credit if any "components" contained in its battery are "manufactured or assembled by a foreign entity of concern."

Since the big three Korean battery makers - LG, Samsung, and SK On - are of the few that have enough scale to wean themselves off the dependence on China for battery raw materials and assembly, US EV makers are increasingly turning to them for subsidy compliance help. It recently became clear that they have already commenced cleaning their supply chain from China-sourced components in order to satisfy the Inflation Reduction Act's grant conditions.

This is why Bill Ford is reportedly planning to probe LG Energy as well, in order to secure more batteries for its future F-150 Lightning and other electric vehicles. Ford has vowed to invest US$50 billion in its EV push by 2030 and have a production capacity for 600,000 electric vehicles by year's end on the way to its stated goal to become the "true EV leader" in the U.S. Taking on Tesla won't be an easy task and Ford also has the world's biggest EV battery maker CATL sniffing around for US locations to build battery plants that will move it closer to its American clients.

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