Ford secures $9.2B DOE loan but has invested little in upstream mineral supply

The impact of a $9.2 billion loan from the US Energy Department to build three electric vehicle battery manufacturing plants supplying Ford Motor Co. could be limited by Ford's comparatively small investments in upstream minerals supply chains.

The DOE's Loan Programs Office announced a conditional commitment to provide the loan to Tennessee-based EV battery-maker BlueOval SK LLC on June 22. BlueOval SK is a joint venture between Ford and South Korean EV battery manufacturer SK on Co. Ltd. The loan will support the construction of three battery-manufacturing plants in Kentucky and Tennessee, which will produce batteries for Ford's EV models.

Ford has a production target of 2 million EVs annually by 2026. Total global passenger EV sales are forecast at 27.6 million units that same year, driving lithium demand 175.2% to 1.2 million tons in 2026 compared to 2022, S&P Global Commodity Insights analyst Alice Yu said in a May analysis.

However, Ford's battery ambitions may be limited by the automaker's ability to acquire raw materials.

"Ford Motor will need to ensure it can keep this huge new plant fed with materials," said Chris Rogers, head of supply chain research at S&P Global Market Intelligence.

"The major automakers are competing with each other, and the battery suppliers, for direct access to materials," Rogers said. "Thus far, Ford has lagged behind its peers, with three investments in mining assets to secure materials (one in lithium, two in nickel) versus eight deals done by Stellantis NV and six from General Motors Co."

Outside of mine asset investments, Ford, like many automakers, has signed multiple sourcing agreements with major miners to reduce supply chain risks. Ford's agreements include deals with Australia-headquartered diversified miner BHP Group Ltd. and US-based lithium producer Albemarle Corp.

The Loan Programs Office and Ford would not confirm if part of the loan would be dedicated to acquiring materials for battery production. Companies that have lithium supply agreements with Ford declined to comment or did not immediately reply to comment requests on whether their lithium will be used at the sites funded by the loan.

Ford executives have expressed confidence in acquiring materials to meet their EV production goals.

"Now critical to our plan is securing the necessary raw materials for these batteries to get to that 2 million unit rate, especially lithium and lithium hydroxide and nickel," James Farley, Ford president and CEO, said on a February call discussing the final quarter of 2022. "We expect to have 100% of raw materials we need for the 2 million unit run rate secured by the end of this year."

Ford treasurer Dave Webb made a statement on the loan but did not address material supply concerns.

"Ford welcomes the Department of Energy's support for BlueOval SK's EV battery production," Webb said. "Major technology transitions have always been accelerated by collaboration between the public and private sectors. The DOE's foresight here will help do the same for the transition to zero-emissions transportation."

BlueOval SK and SK on Co. did not immediately respond to requests for comment.

The full loan is not finalized, the DOE said. While the announcement of a conditional loan commitment "demonstrates DOE's intent to finance the project, several steps remain for the project to reach critical milestones, and certain conditions must be satisfied before DOE issues a final loan."

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