(Bloomberg) — Ford Motor Co. provided investors with new agreements to supply battery materials in a demonstration of how to solidify the supply chain it will need for the massive expansion of electric vehicle production.
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The two largest of the various companies that announced deals with Ford on Monday — US-based Albemarle Corp and Chile’s SQM — are the world’s largest producers of lithium. Those agreements are among five revealed at Ford Investor Day that show how the automaker expects to produce two million EVs annually by 2026, and continue to expand from there.
Availability and cost of basic battery materials — which include lithium, nickel and cobalt — have been a major concern for years among automakers trying to build their electric lineups. The issues have gained more urgency in recent months due to increased competition for supply agreements, wild fluctuations in raw material costs, and the Biden administration’s push for companies to reduce their dependence on China for critical minerals.
“The mining part is not the limitation. It’s really the processing,” Ford CEO Jim Farley said in a Bloomberg TV interview. “So turning these raw materials, especially lithium and nickel, into processing materials we can put into a slurry to make the cells themselves.”
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This is the second time in less than a year that Ford has announced direct deals with battery metal producers, following a series of agreements announced in July. The most recent charters include:
Albemarle to supply more than 100,000 metric tons of lithium hydroxide batteries for nearly 3 million Ford EV batteries starting in 2026, continuing through 2030
SQM guarantees battery-grade lithium carbonate and hydroxide that will help Ford vehicles qualify for consumer tax credits included in the Inflation Control Act
Canada’s Nemaska Lithium produces up to 13,000 tons of lithium hydroxide annually, with Ford becoming the company’s first customer backed by the Quebec government and Levent Corp, the world’s third-largest lithium producer.
EnergySource Minerals and Compass Minerals to supply lithium products, which they expect to produce in California and Utah, respectively, starting in 2025.
David Decklebaum, an analyst at TD Coin, said in a note that Ford appears to be lagging behind competitors on lithium supplies, despite signing the purchase agreement last year with Liontown Resources Ltd. He wrote that the series of deals announced Monday puts them “well ahead” of most automakers, and highlights the more likely path the companies will take to secure supply, as opposed to mergers and acquisitions.
Ford is organizing a two-day event in Dearborn, Michigan, this week to convince investors of the merits of its plans to increase electric vehicle production 16-fold in just a few years. Farley said the company has “largely accomplished” closing the mining capacity needed to reach its 2026 production goal.
The CEO noted that the processing limitations Ford faces are in part political. The Biden administration is working to persuade companies to rely less on China by making electric vehicle incentives subject to requirements for sourcing components and materials from North America and US free trade partners.
“The most important cost control factor as well as the policy will be the continuous processing process,” Farley said. “Eighty percent of nickel and lithium processing is done in China, and we need to localize that.”
— With assistance from Thomas Biesheuvel, Mathieu Dion, and Yvonne Yue Li.
(Updates announced with details of each agreement).
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