Detroit automaker Ford has signalled that it is reassessing its vertically integrated battery supply strategy as it weighs up options for its second generation of EVs.
The automaker's EV division, Model E, reported a full-year Ebitda loss of $4.7bn on the back of its first generation EV line-up, and the company now says it is re-evaluating production strategies.
“One of the things we are taking advantage of and taking some timing delays [for] is rationalising the level and timing of our battery capacity to match demand and actually reassessing the vertical integration that we are relying on and betting on new chemistries and capacities,” CEO Jim Farley says.
Ford has already sunk a great deal of capex into battery plants which it operates in joint ventures with Chinese battery leader Catl, as well as another with South Korean battery firm SK On.
"We expect EVs to be about 40pc of the total [2024 capex], and this reflects products already in flight, including investments in EV powertrain supporting our next generation of products in our LFP battery plant here in Michigan," says CFO John Lawler.
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The firm has already begun the process of finding the right balance of vertical and horizontal integration for its battery supply chain, according to Lawler.
"In 2023, we already started to take action. We delayed our second JV battery plant. We reduced the size of our new LFP plant in Michigan, and we did not proceed with our JV battery plant in Turkey," he says.
"We are further adjusting installed capacity to match demand, reassessing vertical integration in new battery chemistries, adjusting gen-2 products, and potentially their launch timing, to ensure they meet our criteria for profitability, given the new market reality," Lawler adds.
CEO Jim Farley hinted at the possibility of Ford exploring licensing deals with other OEMs for batteries or other powertrain components, even though the company has already patented its next-generation EV skateboard platform.
"I think you are going to see a lot of seismic changes in the industry because of this pricing power reality that we have all faced. More OEM relationships, shifting to a buy versus a build or vertical integration," says Farley.
But even with this work to improve the cost structure of Model E, Ford still expects EV losses to grow to a range of $5bn-$5.5bn in 2024, driven by continued pricing pressure and investments in next-generation vehicles.
But Lawler notes that "we expect our first-generation vehicles to improve their profits throughout the year".
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
