24 May 2023

Ford Motor Company announced five offtake deals to secure battery-grade lithium

On Monday 22nd May, Ford Motor Company announced five offtake deals to secure battery-grade lithium as part of its plans to boost electric vehicle production. Based on the announced deals, Ford could secure enough lithium for up to 1.1 million EVs per year, though full supply is contingent on greenfield projects ramping up as expected.

SFA’s views:

1. Ford's EV supply chain investments are a welcome boost of confidence.

• • Battery material security and cost savings are two pillars of Ford’s future.

  • Partnering with majors Albemarle and SQM improves Ford’s security of supply for the material in alignment with Washington’s policy goals of building a self-sufficient battery supply chain.

  • However, the long lead time before new lithium projects come online means supply risks remain, and prices may remain highly volatile depending on demand and Chinese stockpile drawdowns.

Thomas Chandler

Principal Lithium Supply Analyst

2. Despite policy tailwinds, Ford remains behind rivals GM and Tesla.

• • Competitors’ accelerated pushes to dominate the battery supply chain provided a head start, and Ford remains the laggard.

  • CFO John Lawler admitted that Ford’s total costs are $7b higher than competitors. This leaves the blue oval on the back foot as the EV transition accelerates.

  • Even as costs remain high, Ford may miss out on the most generous IRA incentives for domestic LiB production since its U.S. battery production plans do not begin until 2025-2026.

  • In contrast, GM’s upstream investments were votes of confidence in its ability to produce 1m EVs annually by 2025, with domestic cell production plans ramping up in parallel.

3. Achieving profit at scale is a race against time.

• • By 2026, Ford aims to achieve 8% margins on 2m units produced, up from -40% and 600k units today.

  • Cost cuts, vehicle portfolio simplification, and supply chain improvements are key to Ford’s profitability.

  • Ford remains reliant on juniors such as Liontown, Lake Resources, and Ioneer to get to 2m EVs per year by 2026, leaving it exposed to price volatility as it waits for these new projects to come online.

  • Commodity price volatility is unavoidable even after all upstream projects are online as offtake contracts with producers are likely to be index-linked.

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