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Report: Ford sees "insufficient scale" for its own battery factory to make sense
Stephen Edelstein
STEPHEN EDELSTEIN SEPTEMBER 2, 2020

Several automakers are planning their own battery factories to support increased electric-car production, but Ford isn't one of them.

The automaker sees "insufficient scale" for its own battery factory to make financial sense, and will continue sourcing batteries solely from suppliers, according to an Automotive News Europe report.

The report cites a Ford second-quarter analyst call, in which head of product development and purchasing Hau Thai-Tang said the automaker would need to produce 100,000 to 150,000 EVs annually for its own battery factory to make sense.

This seems to indicate that Ford doesn't plan to make anywhere close to that many EVs for some time.

Ford's most high-profile EV is the Mustang Mach-E, which is scheduled to start deliveries later this year. At the SUV's 2019 unveiling, Ford executive Joe Hinrichs said the first full year of production would be limited to 50,000 units for global consumption—due to battery availability.

Electric versions of the F-150 pickup truck and Transit van have also been confirmed, although it's unclear if these will be high-volume models.

Ford F-Series electric truck prototype
Ford F-Series electric truck prototype

A long list of automakers don't seem to agree with Ford's battery strategy.

General Motors and LG Chem are partnering on a $2.3 billion battery factory in Lordstown, Ohio, which will make batteries for vehicles going on sale in 2023 and beyond. That's expected to include a Chevrolet electric pickup truck and the Cadillac Lyriq crossover—as well as the GMC Hummer EV that will be on sale by then.

Battery subsidiary Accumotive is deeply involved in Daimler's EV plans. Accumotive is opening a network for new factories to supply batteries for its parent company.

While they don't want to make batteries themselves, BMW and Volkswagen are aiming for very close control of production.

As it seeks to secure batteries without its own factory, Ford is already potentially caught in a dispute between LG Chem and SK innovation. LG Chem is attempting to block a pair of SK Innovation battery factories on a shared site in Georgia, alleging trade-secret violations. The factories are earmarked to supply batteries for the electric F-150, as well as VW ID.4 crossovers built at the German automaker's Tennessee factory.
 

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Report: Ford sees "insufficient scale" for its own battery factory to make sense
Stephen Edelstein
STEPHEN EDELSTEIN
SEPTEMBER 2, 2020

Several automakers are planning their own battery factories to support increased electric-car production, but Ford isn't one of them.

The automaker sees "insufficient scale" for its own battery factory to make financial sense, and will continue sourcing batteries solely from suppliers, according to an Automotive News Europe report.

The report cites a Ford second-quarter analyst call, in which head of product development and purchasing Hau Thai-Tang said the automaker would need to produce 100,000 to 150,000 EVs annually for its own battery factory to make sense.

This seems to indicate that Ford doesn't plan to make anywhere close to that many EVs for some time.

Ford's most high-profile EV is the Mustang Mach-E, which is scheduled to start deliveries later this year. At the SUV's 2019 unveiling, Ford executive Joe Hinrichs said the first full year of production would be limited to 50,000 units for global consumption—due to battery availability.

Electric versions of the F-150 pickup truck and Transit van have also been confirmed, although it's unclear if these will be high-volume models.

Ford F-Series electric truck prototype
Ford F-Series electric truck prototype

A long list of automakers don't seem to agree with Ford's battery strategy.

General Motors and LG Chem are partnering on a $2.3 billion battery factory in Lordstown, Ohio, which will make batteries for vehicles going on sale in 2023 and beyond. That's expected to include a Chevrolet electric pickup truck and the Cadillac Lyriq crossover—as well as the GMC Hummer EV that will be on sale by then.

Battery subsidiary Accumotive is deeply involved in Daimler's EV plans. Accumotive is opening a network for new factories to supply batteries for its parent company.

While they don't want to make batteries themselves, BMW and Volkswagen are aiming for very close control of production.

As it seeks to secure batteries without its own factory, Ford is already potentially caught in a dispute between LG Chem and SK innovation. LG Chem is attempting to block a pair of SK Innovation battery factories on a shared site in Georgia, alleging trade-secret violations. The factories are earmarked to supply batteries for the electric F-150, as well as VW ID.4 crossovers built at the German automaker's Tennessee factory.
Very interesting, on the upside a 'wait and see' is a short term cost saver (don't build what you can't utilize), on the downside depending on how this approach limits Ford's ability to produce vehicles to match demand a lack of batteries potentially could cost them sales.
In my case based on competitive vehicles coming on the market, there is a limit to how long I will wait to receive the MMe that I reserved seven months ago and ordered two months ago considering that production hasn't commenced and I am not in the four digit order range. I am very pleased with the overall ride, looks reliability of my Fusion Energi and I truly want to buy another Ford and I would like that Ford to be a MMe, however...
 

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Very interesting, on the upside a 'wait and see' is a short term cost saver (don't build what you can't utilize), on the downside depending on how this approach limits Ford's ability to produce vehicles to match demand a lack of batteries potentially could cost them sales.
In my case based on competitive vehicles coming on the market, there is a limit to how long I will wait to receive the MMe that I reserved seven months ago and ordered two months ago considering that production hasn't commenced and I am not in the four digit order range. I am very pleased with the overall ride, looks reliability of my Fusion Energi and I truly want to buy another Ford and I would like that Ford to be a MMe, however...
So, Ford Corporate is waiting for actual scale before investing? Seems a bit short-sighted. Ford is targeting the Transit, F150, MMe, and one other mysterious vehicle for EV production. Once all are in full swing, i don’t see how they can’t hit at least 100k per year. Plus, all their HEV and PHEV battery needs.

It would make more sense if they are waiting to see what happens with battery cell technology before investing in a manufacturing facility.
 
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So, Ford Corporate is waiting for actual scale before investing? Seems a bit short-sighted. Ford is targeting the Transit, F150, MMe, and one other mysterious vehicle for EV production. Once all are in full swing, i don’t see how they can’t hit at least 100k per year. Plus, all their HEV and PHEV battery needs.

It would make more sense if they are waiting to see what happens with battery cell technology before investing in a manufacturing facility.
Agree, I don't understand the position unless it's because they don't want to show additional costs during the restructuring.
 

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Agree, I don't understand the position unless it's because they don't want to show additional costs during the restructuring.
A plan cost little, but shows forward thinking. Saying you don’t have any plans to do what looks like the smart thing based on market trends is, well, cringe-worthy.

A statement like: ‘As technology advances and product demand increases, Ford is constantly evaluating the feasibility of in-house battery-cell manufacturing. While we are not actively building facilities at the moment, we are open to the prospect of investing in such infrastructure in the not-so-distant future.’
Yes, that’s just a fancy, positive way of saying no. But it sounds a lot better than the number cruncher spouting profitability margins. Which, by the statement as reported, can be interpreted as Ford believes they can’t sell 100k electric vehicles a year after investing $11 Billion.
 

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A plan cost little, but shows forward thinking. Saying you don’t have any plans to do what looks like the smart thing based on market trends is, well, cringe-worthy.

A statement like: ‘As technology advances and product demand increases, Ford is constantly evaluating the feasibility of in-house battery-cell manufacturing. While we are not actively building facilities at the moment, we are open to the prospect of investing in such infrastructure in the not-so-distant future.’
Yes, that’s just a fancy, positive way of saying no. But it sounds a lot better than the number cruncher spouting profitability margins. Which, by the statement as reported, can be interpreted as Ford believes they can’t sell 100k electric vehicles a year after investing $11 Billion.
Agree, I was very surprised at how the statement was phrased because as you posted "...can be interpreted as Ford believes they can’t sell 100k electric vehicles a year after investing $11 Billion."
 

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I need some help:

Is Ford or Borg Warner building the electric motors for the MachE.

If it is Borg Warner, then this too indicates less than a 100% commitment to BEV's by Ford.

This is disturbing to me as I own both Ford stock and Ford bonds and BEV's are the cars/trucks of the future. IMO, If Ford is not "all in" on BEV, other companies will "eat their lunch".

BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E


see:BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E - BorgWarner
 

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Many parts even for ICE vehicles are sourced from outside suppliers. This is the case for almost any manufacturer such as Boeing and Airbus, even Apple which I believe does not manufacture any parts for their iPhones. It allows them to scale up and down if needed without having to invest a large sum of capital until they see a need for producing it inhouse. Ford is a car manufacturer first and foremost, not a battery manufacturer. They don't manufacture the car batteries going into ICE vehicles.
 

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I need some help:

Is Ford or Borg Warner building the electric motors for the MachE.

If it is Borg Warner, then this too indicates less than a 100% commitment to BEV's by Ford.

This is disturbing to me as I own both Ford stock and Ford bonds and BEV's are the cars/trucks of the future. IMO, If Ford is not "all in" on BEV, other companies will "eat their lunch".

BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E


see:BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E - BorgWarner
This makes no sense. I'm a Software Engineer, I guess because my product uses the Linux kernel instead of my own built kernel, I'm not 100% committed.
 

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Many parts even for ICE vehicles are sourced from outside suppliers. This is the case for almost any manufacturer such as Boeing and Airbus, even Apple which I believe does not manufacture any parts for their iPhones. It allows them to scale up and down if needed without having to invest a large sum of capital until they see a need for producing it inhouse. Ford is a car manufacturer first and foremost, not a battery manufacturer. They don't manufacture the car batteries going into ICE vehicles.

I was thinking of Boeing: it is more of an assembler than a manufacturer. But we buy a Mercedes because of the engine. Is a Ferrari a Ferrari without a hand built engine in Maranello, Italy?

Tesla has taken an integrated approach where they make everything. It is an "holistic" approach similar to what Ford did 40 years ago: from their own steel making for body parts to the ashtrays.

The Big 3 followed the Japanese by buying from suppliers on a "just on time delivery" system which is more efficient.

But having said that, the two biggest parts of an BEV are the battery and the electric engine - neither of which Ford is making.

Just sounds strange to me.


.
 

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Going with the Apple approach the iPhone didn’t they outsource more of their chips before eventually going inhouse? as long as Ford has synergy with their supplier I’m not alarmed yet. But I hope down the line they develop in house. I have no scientific backing but I think you make the best products with your own people working the line.
 

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Going with the Apple approach the iPhone didn’t they outsource more of their chips before eventually going inhouse? as long as Ford has synergy with their supplier I’m not alarmed yet. But I hope down the line they develop in house. I have no scientific backing but I think you make the best products with your own people working the line.
I believe Apple designs the chips, but they outsource the manufacturing.
 

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Correct, Apple designs the chips but TSMC manufactures them. Typically in the case of a company like Boeing or Ford, the company engineers works hand in hand with the supplier engineers to design and spec the parts for the vehicles. Some of the parts may be patented and only available by licensing agreement or contract to be made available to Ford only to retain competitive advantage and control of IP.
 

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Correct, Apple designs the chips but TSMC manufactures them. Typically in the case of a company like Boeing or Ford, the company engineers works hand in hand with the supplier engineers to design and spec the parts for the vehicles. Some of the parts may be patented and only available by licensing agreement or contract to be made available to Ford only to retain competitive advantage and control of IP.
I worked for Apple for three years and while they develop they build next to nothing. FoxCon which is a Taiwanese company builds iPhones in Shenzhen and other locations in China. Most major Corps are now assembly plants. R&D and builds are done elsewhere
 

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Let me correct my post , R&D is done in house by Apple engineers and everything else is outsourced
 

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Report: Ford sees "insufficient scale" for its own battery factory to make sense
Stephen Edelstein
STEPHEN EDELSTEIN
SEPTEMBER 2, 2020

Several automakers are planning their own battery factories to support increased electric-car production, but Ford isn't one of them.

The automaker sees "insufficient scale" for its own battery factory to make financial sense, and will continue sourcing batteries solely from suppliers, according to an Automotive News Europe report.

The report cites a Ford second-quarter analyst call, in which head of product development and purchasing Hau Thai-Tang said the automaker would need to produce 100,000 to 150,000 EVs annually for its own battery factory to make sense.

This seems to indicate that Ford doesn't plan to make anywhere close to that many EVs for some time.

Ford's most high-profile EV is the Mustang Mach-E, which is scheduled to start deliveries later this year. At the SUV's 2019 unveiling, Ford executive Joe Hinrichs said the first full year of production would be limited to 50,000 units for global consumption—due to battery availability.

Electric versions of the F-150 pickup truck and Transit van have also been confirmed, although it's unclear if these will be high-volume models.

Ford F-Series electric truck prototype
Ford F-Series electric truck prototype

A long list of automakers don't seem to agree with Ford's battery strategy.

General Motors and LG Chem are partnering on a $2.3 billion battery factory in Lordstown, Ohio, which will make batteries for vehicles going on sale in 2023 and beyond. That's expected to include a Chevrolet electric pickup truck and the Cadillac Lyriq crossover—as well as the GMC Hummer EV that will be on sale by then.

Battery subsidiary Accumotive is deeply involved in Daimler's EV plans. Accumotive is opening a network for new factories to supply batteries for its parent company.

While they don't want to make batteries themselves, BMW and Volkswagen are aiming for very close control of production.

As it seeks to secure batteries without its own factory, Ford is already potentially caught in a dispute between LG Chem and SK innovation. LG Chem is attempting to block a pair of SK Innovation battery factories on a shared site in Georgia, alleging trade-secret violations. The factories are earmarked to supply batteries for the electric F-150, as well as VW ID.4 crossovers built at the German automaker's Tennessee factory.
Quite the catch-22 in this article. Can't make more than 50,000 cars because they can't get third-party batteries, can't make their own batteries because they don't make 100,000 vehicles. This reminds me of the local car dealers' stance on EVs. People don't buy EVs, they say. How do you know - you don't carry them, I say. For the last couple of years I've made the rounds of all the local car dealers asking to see their EVs. The best response I was able to get, until very recently, was directions to distant cities where they might have some. The dealerships are finally progressing - let's hope the manufacturing keeps up.
 

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Many parts even for ICE vehicles are sourced from outside suppliers. This is the case for almost any manufacturer such as Boeing and Airbus, even Apple which I believe does not manufacture any parts for their iPhones. It allows them to scale up and down if needed without having to invest a large sum of capital until they see a need for producing it inhouse. Ford is a car manufacturer first and foremost, not a battery manufacturer. They don't manufacture the car batteries going into ICE vehicles.
Very true - but you need to lock down the necessary parts to keep things moving. The fight over a limited battery supply could be a roadblock to Ford's manufacturing plans.
 

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I need some help:

Is Ford or Borg Warner building the electric motors for the MachE.

If it is Borg Warner, then this too indicates less than a 100% commitment to BEV's by Ford.

This is disturbing to me as I own both Ford stock and Ford bonds and BEV's are the cars/trucks of the future. IMO, If Ford is not "all in" on BEV, other companies will "eat their lunch".

BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E


see:BorgWarner Enables High Performance, Eco-friendly Driving with Latest Integrated Drive Module for Ford Mustang Mach-E - BorgWarner
Its not like Ford went and bought a system off-the-shelf. From all that I have read, Ford engineers worked with specialists from a multitude of fields to design and build the MMe as a whole. B/W is doing final assembly of the iDM, which includes some of their components and gearing, as well as “a motor and power electronics from other suppliers”.
The Ford motor design is also unique in its approach, delivering more torque directly to the wheels than Teslas current design. Just because Ford doesn’t manufacture in-house yet, doesn’t mean they are not committed.

For ICE vehicles, Ford (and almost every other manufacturer) has used AISIN (Toyota) built transmissions for years. But the transmissions were built to each individual manufacturer’s design and specifications. Another large transmission manufacturer used in the industry is Magna PT (aka Getrag). As we know, this doesn’t mean these legacy manufacturers are not committed to building ICE vehicles.

Some of the larger automakers also build their own transmissions for their higher-volume vehicles. So, if EV sales pick up as we expect, they will most likely start in-sourcing.

My (unsolicited) view is, If out-sourcing is the quickest way to get all these companies in the game, then by all means, lets go!!!
 

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Very true - but you need to lock down the necessary parts to keep things moving. The fight over a limited battery supply could be a roadblock to Ford's manufacturing plans.
Ford is pursuing alternative battery-cell supply contracts with a company manufacturing the cells here in the US, but LG is trying to block it.
So, although they will not be making the cells themselves, they are trying to address the shortage.


Agree, I was very surprised at how the statement was phrased because as you posted "...can be interpreted as Ford believes they can’t sell 100k electric vehicles a year after investing $11 Billion."
Well, now that I am able to actually read the details not behind a paywall (thanks Teslarati), it makes a bit more sense.
From an article by Joey Klender on Teslarati:

Hau Thai-Tang, Ford’s Head of Product Development and Purchasing, stated that the company would need to manufacture between 100,000 and 150,000 electric vehicles a year to justify a battery production facility, Automotive News reported.

“We don’t have that volume initially to justify that capital expenditure,” Thai-Tang said. “There’s insufficient scale for any one OEM, other than somebody who’s a full-line battery-electric manufacturer like Tesla, to justify that spending.”

Thai-Tang’s statement indicates that there is a possibility that Ford could change its mind about battery production in the future. Still, the company will have to increase the production of its electrified lineup. For now, he is okay with buying batteries from suppliers.

“It gives us the ability to access the latest technology and innovation across multiple suppliers,” he said.

 

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Discussion Starter #20
Quite the catch-22 in this article. Can't make more than 50,000 cars because they can't get third-party batteries, can't make their own batteries because they don't make 100,000 vehicles. This reminds me of the local car dealers' stance on EVs. People don't buy EVs, they say. How do you know - you don't carry them, I say. For the last couple of years I've made the rounds of all the local car dealers asking to see their EVs. The best response I was able to get, until very recently, was directions to distant cities where they might have some. The dealerships are finally progressing - let's hope the manufacturing keeps up.
Remember, Ford originally stated they could only build 50,000 BEV Mach Es in the first year due to limits on the number of batteries they could get. They never stated the plan for year two an, in fact, it looks like Ford may be making significantly more than 50,000 2021 Mach Es.
 
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