Ford, GM and Chrysler: Partnership in the battery fight

Written by Al Root
of Barron
Translation: Thomas Steer

The U.S. auto industry relies on reshoring — that is, it moves its production from overseas to the United States. The reason for this is, on the one hand, electric cars and, on the other hand, US government policy.

According to a Bloomberg report, the three major car companies Ford, General Motors and Chrysler’s parent company Stellantis want to build a new capacity to make batteries together with the Korean company Posco Chemical.

That move would make perfect sense. All three are investing heavily in the EV supply chain, enabling them to get the resources they need to achieve their e-mobility growth goals.

Ford, for example, is building an $11 billion campus in Kentucky and Tennessee with its battery partner SK Innovation. Electric cars are built there and batteries are made there.

Posco Chemical doesn’t make batteries, it makes the materials used in batteries. This includes, for example, cathodes – parts of a lithium-ion battery that contain metals such as lithium, nickel or iron.

Car manufacturers have previously set themselves the goal of building electric cars. Many – including Ford and GM – aim to have half of their vehicles fully electric by the end of this decade. Next, automakers are looking to tap into local battery capacity. Most EV batteries and battery accessories are now manufactured in Asia.

Traditional car and battery manufacturers have announced an annual battery capacity of about 600 gigawatt hours for North America – enough to produce more than 6 million electric cars a year.

Tesla is not included here, it wants to build its battery manufacturing capacity. The company hopes to eventually have 1 terawatt hour of battery capacity per year in the US. This could be used to make around 10 million electric cars.

Now that automakers have laid out their battery production plans, battery material announcements follow. GM and Posco already have a battery equipment deal in North America.

Tesla is also investing in lithium refining capacity in Texas. A lithium refiner further extends the battery value chain. So it is a different part of the battery manufacturing process, but basically the same as what is being discussed between Posco and the 3 companies mentioned above.

Automakers are investing in their internal supply chains to cut costs. They also want to make sure they have enough resources to reach their higher EV goals. But US government policies also play a role.

EVs and EV batteries must be manufactured in North America to be eligible for tax credits under the recently passed Inflation Reduction Act. The requirements for tax credits will be phased in. Ultimately, however, EVs and their components must be made in the United States if car buyers are to receive the $7,500 federal rebate.

Shares of GM, Ford, Stellantis and Tesla rose slightly in premarket trading on Friday. The S&P 500 and Dow Jones Industrial Average futures both rose about 0.5 percent, following Thursday’s big gains.

The S&P 500 rose 5.5 percent on Thursday and the Nasdaq Composite rose 7.4 percent after US inflation data came in lower than expected.