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The new E-Transit battery-powered van is produced at a plant in Kansas City, Ford’s first U.S. plant to assemble both batteries and all-electric vehicles in-house.
Courtesy Ford
Car makers are racing to secure supplies of materials such as lithium and nickel, commodities that they didn’t have to worry about before the electric-vehicle boom. That hasn’t caused too much stress at
Ford Motor,
which has built a team that, perhaps unsurprisingly, includes some former
Tesla
employees.
Talent is a big deal when starting a new business even when it is inside an old one. “One of the first things we did when Model e was created, is we went out and we built a raw-materials team from scratch,” said Lisa Drake, head of industrialization at Model e, Ford’s (ticker: F) EV division.
Ford hired people from miners such as
Rio Tinto
(RIO) and chemical makers such as
BASF
(BAS.Germany), as well as from Elon Musk’s dominant EV maker. “Our battery raw materials director came from
Tesla,
” Drake said. “Our team…has probably sourced more lithium and nickel than any other team on the planet.”
Ford’s executive director of advanced EV development, and chief advanced product development and technology officer, Alan Clarke and Doug Field, respectively, both worked at Tesla (TSLA), too.
Experience has helped and so has size. The Model e division is still relatively small. First-quarter sales came in at about $700 million, a sliver of Ford’s total $39 billion in automotive sales.
The small size allows Drake and her team to move fast. A deal announced by Ford in March, to invest in an Indonesian nickel processing plant with
PT Vale Indonesia
Tbk and China’s Zhejiang Huayou Cobalt, came together in weeks. “We went in, we evaluated, we had our technical experts with us, we liked what we saw, we signed a memorandum of understanding on the trip,” said Drake.
Along with nickel, a component in some lithium-ion batteries, Ford has locked up lithium supplies in agreements with miners
Liontown Resources
(LTR.Australia) and Rio Tinto. Ford also has battery plants going into Michigan, using technology from battery leader
CATL
(300750.China), as well as plants in Kentucky and Turkey.
Ford is doing all this in order to produce more EVs. Ford delivered just fewer than 100,000 EVs globally in 2022, but plans to make EVs at a “run-rate” of 600,000 a year by the end of 2023, and two million a year by the end of 2026. In other words, in four years Ford is ramping up monthly EV production to almost 170,000 units from less than 10,000.
Doing that requires a lot of batteries and battery materials. Getting them is only half of the battle.
Costs are the other challenge. Ford needs to source materials cheaply to hit its goal for EVs to produce an 8% operating profit margin by 2026. That would more or less match the 8.1% operating-profit margin the whole company achieved in the first quarter, but Ford has to do it while the rest of the global car business is trying to make more EVs.
“The International Energy Agency is expecting [the world] to go from about 16 million EVs on the road now to about 350 million by the end of the decade,” said Steve Schoffstall, director of ETF product management at
Sprott,
a Canadian provider of commodity-linked investment products including the
Sprott Lithium Minters ETF
(LITP). That will keep lithium markets tight and prices elevated for years to come, he said.
Getting out ahead of the boom is important. Investors will hear more about Ford’s EV supply chain strategy, and the team executing it, at an investor meeting it has scheduled for May 22.
EVs are a big part of Ford’s future, but lately investors have been concerned with the present. Ford stock has fallen about 13% over the past 12 months while the
S&P 500
and
Dow Jones Industrial Average
have both gained roughly 3%.
Rising interest rates and declining vehicle affordability have made some investors less enthusiastic about most car-related stocks. Auto stocks in the
Russell 3000 Index
are down about 25%, on average, over the past 12 months.
Write to Al Root at [email protected]
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