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22 February 2023

SK-Innovation dragging its heels leads to Ford switching to LG

Despite Ford just announcing it will work with CATL LFP technology in the US market, this week it has firmed up European plans with LG Energy solution and local Turkish businesses to build a factory for EV batteries in what it describes as the “wider European region.”

Alongside Turkish company Koç Holdings, a local industrial and services group, LGES and FORD have signed a non-binding MOU to build one of the largest commercial electric vehicle battery cell production facilities in Europe.

If this sounds vaguely familiar, an identical deal was announced last February with SK-On, another Korea firm, which went soft on the deal last March, saying that it was worried about the current economic conditions. It looks like LG was waiting in the wings ready to sign an almost identical deal with Ford, although now it seems to be looking to come online a year later.

The project should go ahead near Ankara, Turkey, starting later this year, and ready to churn out batteries by 2026. Ford says it is targeting support for 2 million electric vehicles globally by that time,

The annual production capacity will be at least 25 GWh, rising to 45 GWh, of battery cells. The deal is subject to final agreement by all parties. It will be based in an industrial zone in Başkent, near Ankara.

Ford has partnered with SK Innovation for NMC battery factories in the US, and only recently said it would use technology supplied from CATL to build LFP batteries for the US market also. When the first SK-On deal was announced for Turkey, Ford confirmed that it would make NCM (nickel, cobalt, manganese) batteries.

In the US, Ford & SK Innovation have announced two similar factories in Tennessee and Kentucky with one set to hit 25 GWh of battery and the other 31 GWh. Both are supposed to be operational by the end of 2025/6.

Increasingly it looks like car-makers are using up their NMC capability on high-end commercial vehicles, and Ford remains a top European name in commercial vehicles, with the Ford Transit among the best-selling commercial vehicles, and we understand this battery factory is for that type of vehicle for the most part. Ford has set its stall out that it hopes to reach 240 GWh of global battery capacity by 2030. But who will be its primary battery supplier?

If SK-On or SK Innovation (same company) are not going to support Ford in Europe, where there is a law which says that no more ICE vehicles can be sold new from 2035, then why would SK-Innovation support Ford in the US, ostensibly a weaker market.

We would not be surprised to see future US factories for Ford to be handled with LG Energy Solution (which also works with General Motors and Stellantis) and for SK Innovation to step back from going on alongside Ford in batteries. The closer Ford gets to CATL, and the more it straddles top end models (with NMC batteries) and lower range models (with LFP) across a broad range, then the less batteries its key partners will be asked to make (because half will be LFP).

SK On is the wholly owned battery unit of SK Innovation and counts Hyundai and Volkswagen among its customers.

LGES has plants in Korea, US, China, Poland, Indonesia, and Canada, and has total annual production capacity of 200GWh and has gone “all in “ on lithium ion batteries.