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27 July 2022

Ford signs up CATL LFP batteries for top models in the US

Earlier this week Ford announced that it has added new battery chemistries, and has secured contracts delivering 60 GWh of annual battery capacity, enough to support a 600,000 EV run rate by late 2023.

In rough translation this also includes the firming up of all of its battery relationships, including that with SK Innovation in the US, and with LG Energy Solution in Europe, but at the same time bringing in new CATL technology for LFP to make the entire Ford operation cheaper and therefore more profitable. The US deals with SK Innovation are set to make the South Korean company the largest battery manufacturer in the US by some time before 2025, but if Ford follows through with CATL that company will end up making more batteries in the US than anyone else by 2030.

The Mustang and F-150 Lightnings post 2024 will be powered by LFP, not NCM lithium ion chemistries, and this is what that company meant when it referred to new battery designs. However the devil in such moves is in the detail, while it will cuts Ford’s costs to shift these to LFP, by some “10% to 15%,” it is questionable if this means at the equivalent power – a sacrifice to some lower model “range” may well accompany these shifts, but then again price cuts may also emerge. The only way it could reach for LFP and not sacrifice range is using the new CATL Qilin battery packaging technology, which it claims more than matches the Tesla 4680 battery design in energy density. In its LFP form it’s not quite so dense, but it’s still ahead of the entire LFP pack.

The CATL approach uses a packing technique which can be used with either NMC or NCA or LFP, creating different energy densities, touting 255 Wh/kg figure for the first two technologies, with LFP closer to 160 Wh/kg. It is cheaper to make, lasts longer, offers more charge cycles, is safer and less likely to result in thermal runaway. CATL already supplies all of Tesla’s batteries for its Shanghai factory for these reasons.

The more advanced NMC version of the Qilin battery pack can offer a range of 1,000 kilometers – the LFP versions somewhat less but perhaps 600 miles. The packaging technology includes putting liquid cooling between the cells, rather than underneath them, multiplying total cooling area by 4 times, and this can be placed under the control of a BMS, so that it can “manage” overheating events. It boasts 13% more power than the 4680, and will go into manufacture next year. The system will charge to 80% in 10 minutes.

Clearly Ford also thinks it has finally got a handle on its burgeoning EV sales, and says that by 2024 it will shift some 270,000 Mustang Mach-Es across both North America, Europe and China (so perhaps 150,000 in the US), and 150,000 F-150 Lightnings for North America alone, and another 150,000 Transit EVs across North America and Europe (split 50/50). And as soon as this is done it will begin the ramp of a new SUV designed to hit 30,000 units by 2024, for delivery mostly in Europe – hence 600,000. We think it will be able to sell far more. But that’s most likely only 375,000 in the US.

But any changes to the range will have to wait – this is effectively an intercept strategy, which says that by 2024, LFPs using the just announced CATL technology will be able to do even better than they can today, and between now and then, it looks like NCM batteries will continue in those models and then suddenly be swept aside, leaving the declining NCM share for higher value models. If I was SK Innovation or LG Energy Solution, I’d be worried.

Our shipment forecasts at Rethink Energy for passenger cars in the US for 2024 is 4.3 million, for a cumulative total on US roads of 12.7 million. Recent sales are slightly behind this, but there is time to catch up.

Ford US sales have peaked from 14.9% market share in 2017 down to 12.6% last year. To keep that market share in EVs in the US Ford would have to ship 542,000 of those 600,000 2024 vehicle inside the US – our rule of thumb calculations above show this is not likely.  The only conclusion is that it has yet again Ford has underestimated the rate at which the US market is switching and that it has supply chain issues which will run right through to 2026 or 2027 for the US. Our continued conclusion is that it will see Ford market share fall to around 10% by that time as other’s eat its lunch.

This is all entirely predictable from how late it entered the EV marketplace, although since that move it has done a credible job of shifting across.

It’s next target is 2 million annual EVs by 2026 and it says it has lined up 70% of the battery capacity it needs for this – by that time globally, even if you limit it to markets where Ford is strong, total annual shipments at that pint will be 25 million and the cumulative global fleet around 104.5 million – this still looks to us like a shrinking share. That’s not really surprising, because if they survive companies such as Tesla, Rivian and Luci, as well as Chinese exporters Nio and Expeng, will all eat a piece of the US market – and globally the larger traditional Chinese car firms like SAIC and Dongfeng will take more and more home share, and start to export EV models, and further squeeze market share. On the other hand any traditional car firm which does not make the transition will be there for Ford to attack.

Ford says it has plans to localize 40 GWh per year of lithium iron phosphate capacity in the USD by 2026 and it has a new deal with CATL on strategic cooperation for global battery supply – that non-binding at present and is not going to make SK Innovation and LG Energy Solution that happy and we have to ask is it really OK to use Chinese batteries inside of the US and still use Biden’s subsidies?

Ford say it has raw materials sourcing deals in the US, Australia, Indonesia and other places. It will certainly need others places, because there is just not enough supply coming from those 3 countries. And it looks like most of them will end up coming from China.

While Ford is saying that its EV sales will grow at 90% CAGR, it does not expect the entire EV market to grow that fast. Something is wrong with the calculators at Dearborn, because it cannot grow faster than the market if it is only sourcing just enough lithium ion material to lose home market share. That is why it has been forced to go cap in hand to CATL, despite what its own government will think of it.

In short the public Ford battery plans are impressive, but they do not add up to the success which the company executives are predicting. The speed of the decay of the International Combustion Engine models battery plans – need to be factored in. If Ford is saying that it will maintain market share, then EV progress needs to be slower – and in fact it is accelerating. And ICE share should not be falling so far – but it is.

The announced factories capacities at Tennessee and Kentucky will not be enough for Ford to deliver 60 GWh a year of battery by 2024, so the shortfall either has to come from the two 100% owned SK Innovation factories in Georgia, which add another 21.5 GWh to the mix, or from CATL, which has yet to announce any US factories but is known to be looking. Perhaps Ford knows more about that than it is letting on and at least more than it wants SK Innovation to know.

Outside of the US, Ford has a long standing relationship with LG Energy Solution, from its significant manufacturing plant in Poland, which outputs around 38 GWh now and is expected to raise to 65 GWh by 2025. These batteries have been the focus of multiple car recalls in its other relationship with General Motors.

Ford said that CATL will provide the LFP battery packs for both the Mustang and F-150 Lightnings by 2024 and that this will include the new prismatic designs we talked about in June from CATL, with its Qilin battery which uses its 3rd generation of packaging improvements.

Ford’s says its EV architecture allows incorporation of CATL’s prismatic LFP cell-to-pack technology to deliver scale quickly.

It is LG Energy Solutions which will lose the NCM cell production sales when the Mustang Mach-E models move across, as it provides them at present.

Ford’s search for major new mining partners Huayou, BHP and Liontown Resources of Australia, has led it to deals for nickel, cobalt, and lithium and it is also talking to Rio Tinto about lithium and copper from Argentina.

Ford also says it has a non-binding letter of intent for EcoPro BM and SK On to build cathodes in the US and for Ioneer’s Rhyolite Ridge project in Nevada and Compass Minerals lithium hydroxide and lithium carbonate in the US.

As CATL picks up US momentum, if Ford can be a partner, so can GM and Stellantis and expect more and more pressure on the supply chain for both of them to push them towards a relationship with the Chinese giant.2