Ford delivers on Biden's battery promise, Mexico may benefit

Ford Motor Co. and SK Innovation Co. Ltd. will launch a joint venture named BlueOvalSK to build batteries in North America. The aim is to meet 60 GWh of annual production capacity "by mid-decade" compared to 140 GWh of production needs expected by the automaker by 2030.

The move likely confirms localization and vertical integration of electric vehicle manufacturing, discussed in Panjiva's April 20 research, which lies behind the onshoring plans being put in place by the U.S. and other countries.

It also follows the resolution of an intellectual property spat between SK Innovation and LG Chem Ltd., which had cast a pall over electric vehicle supply chains. One critical detail will be where the plants will be located in North America. The U.S.-Mexico-Canada Agreement should allow production in Mexico, the U.S. or Canada, although state support may be most generous from the U.S. The latter should become clearer once the Biden administration's critical supply chain review is completed in early June.

While the electric vehicle supply chain is ramping up, the internal combustion engine supply chain for Ford appears to be struggling, in part due to the ongoing shortage of semiconductors. Panjiva's data shows that Mexican imports of parts for Ford — including those associated with the Mach-E, which are assembled in Cuautitlán, Mexico — fell 60.7% year over year in March, following a downturn of a similar order that started in January.

Shipments of gearboxes fell fastest with a drop of 95.9%, while internal combustion engines fell 49.6% and body parts decreased by a more modest 29.5%.

The increasing reliance of the U.S. on imported lithium-ion batteries during the ramp-up of electric vehicle production can be seen in U.S. seaborne imports, which jumped 68.7% year over year in the three months to April 30 and by 104% compared to the same period of 2019, Panjiva's data shows.

The expansion was led by a 64.1% year-over-year surge in shipments linked to Tesla Inc. There was also a return to the market of SK Innovation — likely including deliveries for Ford — following the resolution of the intellectual property case. The growth in imports associated with the firm was 206.0% in the three months to April 30 compared to 2019. Meanwhile, shipments linked to LG Chem were lower than a year earlier but still up 275.5% compared to 2019.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.