Ford Motor Co. has reached a big deal with LG Energy Solution to strengthen its European electric vehicle (EV) battery supply chain and to optimize production in the U.S. The deal, announced on October 15, is a big step in Ford’s plan to satisfy surging demand for EVs and comply with changing regulations.
European Supply Agreement
Ford has agreed a new contract with LG Energy Solution to supply an estimated 109 gigawatt hours of batteries for its commercial EVs in Europe under the new contract. The supply agreement, which is due to start in 2026, will run for four to six years. The deal is seen as helping Ford meet stringent battery sourcing requirements for EVs sold in Europe and the UK.
U.S. Production Shift
To comply with the battery sourcing requirements of the Inflation Reduction Act, Ford and LG Energy Solution are moving battery production of the Mustang Mach-E from LG’s plant in Poland to its U.S. facility in Michigan starting in 2025. Ford’s decision will allow it to qualify for valuable tax credits on its EVs.
Implications for the EV Market.
This partnership has significant implications for both companies and the broader EV industry:
- Regulatory Compliance: The deal will allow Ford to meet new EU rules on battery collection, reuse and recycling that kicked in in August 2023.
- Market Competitiveness: Ford could gain a competitive edge in the growing EV market by qualifying for the New Clean Vehicle Tax Credit of up to $7,500 on EVs.
- Expanded Production Capacity: This agreement helps LG Energy Solution achieve its ambition to scale up battery manufacturing capacity in the EU and become a leader in the circular battery ecosystem.
Ford’s Broader EV Strategy
The LG Energy Solution deal is part of Ford’s comprehensive approach to EV battery production:
- BlueOval SK Joint Venture: Through its partnership with SK On, Ford is ramping up U.S. battery production with a new plant in Kentucky that will manufacture cells for the E-Transit and F-150 Lightning pickup starting mid-2025.
- BlueOval Battery Park Michigan: This facility is on track for Ford to begin lithium iron phosphate (LFP) battery production in 2026, and the company plans to make the lowest cost battery cells in North America.
Such strategic partnerships and investments in battery production are becoming more and more important for automakers as the EV market continues to grow. Ford’s multi-pronged strategy to secure its battery supply chain shows that the company is serious about staying in the game in the quickly changing EV world.
