Ford is shipping its electric car engine with a series of battery deals

(Reuters) – Ford Motor Co. (FN) on Monday unveiled new supply deals for lithium in the battery category, as the US automaker aims to meet its goal of producing two million electric cars by 2026 and close the gap with market leader Tesla. (TSLA.O).

Ford is holding an investor event on Monday to explain how it plans to make money and ramp up production of its next generation of electric vehicles as it works to address its current significant cost disadvantage against competitors.

North American automakers are racing to secure supplies of battery materials to ramp up production of electric vehicles as demand for greener vehicles soars and to take advantage of tax breaks offered by the United States.

Albemarle Corp. (ALB.N) and Nemaska ​​Lithium will supply lithium hydroxide, an essential component in the cathode of lithium-ion batteries, over five-year and 11-year terms, respectively.

Albemarle will supply more than 100,000 metric tons of lithium hydroxide for nearly 3 million future Ford EV batteries, the two companies said Monday.

Albemarle shares were up 1% in premarket trading, at $206.01.

The deal “helps us strengthen and de-risk our plans to acquire the key minerals we need to make electric vehicles affordable to our customers for the long term,” said Lisa Drake, Ford vice president.

Lithium, a major component of most modern electric vehicle batteries, has a higher energy density, which makes it possible to keep batteries compact and have higher storage capacities, which is necessary to enable covering long distances between charges.

Privately held EnergySource Minerals will supply lithium hydroxide from the Imperial Valley, California site, which is expected to become operational in 2025, she said, while Compass Minerals (CMP.N) will provide lithium carbonate.

Ford earlier this year joined PT Vale Indonesia and China’s Zhejiang Huayou Cobalt as its new partner for a $4.5 billion nickel processing plant in Indonesia.

The deals announced Monday also come as lingering skepticism on Wall Street about the legacy automakers’ ability to achieve the lofty goals set for electric vehicle production.

Ford has said it will have the global capacity to build 600,000 electric vehicles by the end of 2023. Meanwhile, rival General Motors Corp. (GM.N)’s electric production could also be capped in the middle of the decade, according to forecasts and analysis prepared for Reuters. .

The US automaker on Monday reaffirmed its full-year forecast of $9 billion to $11 billion in adjusted earnings before interest and taxes and about $6 billion in adjusted free cash flow.

Ford continues to expect its electric car unit to lose $3 billion this year.

Nemaska ​​Lithium is equally owned by Investissement Québec, the Quebec government’s economic development agency, and Livent Corporation (LTHM.N). Ford will be its first customer.

Chile’s SQM (SQMA.SN), the world’s second-largest lithium producer after Albemarle, signed its long-term supply agreement with Ford on Monday, though neither company specified how many years.

Additional reporting by Abhijith Janappavaram in Bengaluru; Edited by Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles.