Ford’s Getting A $9.2 Billion Government Loan To Catch Up With Tesla

More and more people are considering an electric vehicle for their next car. I get the question all the time: Which electric vehicle should I buy? For the price, it’s extremely hard to argue with the Tesla Model Y or Model 3. There are signs, however, that this is a short-lived condition.

Here’s a fun fact: EV registrations grew 72% from January to April this year, due in no small part to changing tax incentives. Here’s another fun fact: 60.8% of those cars sold were Teslas, with 24 different marques having to share the other 39.2%.

That’s gonna change.

Ford’s $9.2 Billion Loan Is One Of The Biggest Ever

Exactly one month ago I wrote about how Ford made some big moves to secure more lithium resources for its future battery plans as part of its plan to win future electric market share. Today, we found out via this big exclusive Bloomberg piece, that Ford’s going to get $9.2 billion in taxpayer money to build the battery plant that uses some of that lithium.

Here’s what’s in the report:

A deep-pocketed US government program designed to finance futuristic energy businesses is issuing a conditional $9.2 billion loan to Ford Motor Co. for the construction of three battery factories. The enormous loan — by far the biggest government backing for a US automaker since the bailouts in the 2009 financial crisis — marks a watershed moment for President Joe Biden’s aggressive industrial policy meant to help American manufacturers catch up to China in green technologies.

The new factories that will eventually supply Ford’s expansion into electric vehicles are already under construction in Kentucky and Tennessee through a joint venture called BlueOval SK, owned by the Michigan automaker and South Korean battery giant SK On Co. Ford plans to make as many as 2 million EVs by 2026, a huge increase from the roughly 132,000 it produced last year.

The three-factory buildout by BlueOval plus an adjacent Ford EV assembly unit have an estimated price tag of $11.4 billion. BlueOval was previously awarded subsidies by both state governments. That means taxpayers would be providing low-interest financing for almost all of the cost.

That’s right. Taxpayers are basically paying for all of it. Then, on top of that, the automaker is going to be able to pass on $7,500 of savings to consumers via the IRA tax credit.

Good!

There’s a sweet graphic from Bloomberg that’s interactive if you read the story, but is sufficient enough to explain why I think this is fine:

Awesome graphic from the team over at Bloomberg, putting the scale of this commitment in the context of LPO’s other loans since our first one went out the door nearly 15 years ago. pic.twitter.com/TiHj38didj

— Nathaniel Horadam (@NW_Horadam) June 22, 2023

You see, back in 2008 we completely screwed up our economy due to something called the Residential Mortgage Backed Securities market (fun fact, from 2005-2007 I worked in the Commercial Mortgage Backed Securities market). Needing to keep the economy from slumping into a complete recession, the Obama Administration rolled out the Advanced Technology Vehicle Manufacturing program under the Department of Energy’s Loan Program Office.

Many of the loans didn’t work out, even if they were repaid. Solyndra, famously, went kaput. Fisker didn’t quite work out. Even the money Ford took was designed to help boost small car sales over SUVs, which obviously didn’t happen (though a lot of people kept their jobs). That little green dot with the arrow at the bottom? That’s $465 million to Tesla. While a huge amount of wealth there was created for Elon Musk, it was also created for investors, and workers, and helped kickstart the electric car revolution.

In my mind, you can take all of the money spent on all of those other projects and it’s worth it to get one Tesla. The Trump administration didn’t feel this way and, under Secretary Rick Perry, the LPO made like one loan to a nuclear facility. President Biden obviously feels differently and is using the Loan Program Office to make some huge bets.

Patrick wrote fairly persuasively earlier this week that many automakers clearly thought they could greenwash their way to the future, and are now grappling with the reality that they can’t. Ford is not one of those automakers. Yeah, they’ll still keep making trucks, but they’re two-feet in on this EV business.

Ford Is Actually In A Good Spot, Relatively

Demonstrating excellent timing, Automotive News has a story with a bit of perspective on the short-term winners and losers in the EV space this morning. As demonstrated by the market share numbers, the electric car market is growing, but it’s growing unevenly.

Chevy has a hit on its hands with the Bolt, but the Bolt is going away and none of the cars it’s replacing it with are seriously on the market. Nissan, which used to be the #2 EV seller in the United States, is struggling to get cars into the hands of buyers. The same is true for Porsche, Cadillac, Rivian, and Lucid. Whether its supply chain issues for longstanding manufacturers or awareness/price issues for new entrants, it’s hard to fight for the customers who aren’t just going to end up buying a Tesla. Add to that tax incentive woes for companies like Kia and Hyundai, and you can see why so many non-Tesla automakers are struggling.

Still, there are bright spots, according to Automotive News:

BMW’s EV registrations reached 10,680 in the January-April period, compared with 519 a year earlier. Mercedes-Benz’s EV registrations quadrupled to10,519, Experian said, and Audi generated a 31 percent gain to 6,283.

Who is best situated to pick up share in this market? It’s probably Ford, which suddenly has a lot of inventory on its hands, a new Tesla charging deal to get people excited about, and some new (for them) battery chemistry coming to market. Hyundai also has increasingly available vehicles, but they’re stuck leasing cars if they want to take advantage of tax incentives. From S&P Global’s latest inventory report:

At the end of May, Hyundai had the most EVs in dealer advertised inventory, at about 15,000 units. But the fast mover is Ford, which passed Hyundai in early June. Perhaps maximizing the marketing impact of its shared-charger arrangement with Tesla, Ford has tripled its advertised inventories of the Mustang Mach-E in little more than a month. By early-June, Mach-E inventories were at about 11,000 units – for a vehicle that has cracked the monthly 5,000-units-sold only once since launch, and which hasn’t broken 3,000 units yet this year. This could be a sign that Ford is truly entering the EV sales and share race. Not that VW is standing still, as its ID.4 advertised inventories have doubled to 10,900 units since early in the year – with no signs the Chattanooga factory is slowing down. On the flipside, at the beginning of the year, the Chevrolet Bolt had the most inventory of any BEV; now it’s a distant fifth.

I’m curious to see how Ford manages to sell (or not sell!) Mach-Es this summer. It might be a good time to try and get a great deal.

Lithium Iron Phosphate Seems Like The Future (Of Affordable EVs)

I’m gonna beat this drum until my arms fall off, but based on what I’ve read, it seems that a lithium iron phosphate (LFP) battery is the best battery chemistry for most cars and should increasingly become the choice for most consumers. BYD figured this out ten years ago, Tesla came to this conclusion two years ago, and it seems many automakers are starting to come around to the idea.

Check out this analysis from Reuters and Paul Lienert for a good summary of why:

“LFP is less expensive than cobalt and nickel, and all the minerals can be obtained here in North America (which means) much lower transportation costs and a more secure supply chain,” said Stanley Whittingham, professor at Binghamton University in New York and a 2019 Nobel laureate for his work on lithium ion batteries.

The addition of manganese, a staple ingredient in rival nickel cobalt manganese (NCM) battery cells, has enabled lithium iron phosphate cells to hold more energy than previously, providing EVs with more range — up to 450 miles (724 km) on a single charge, Toyota said recently.

NCM batteries have the big advantage of being able to delivery more range, which has been a key factor for a lot of people. Still, LFP batteries have so many other advantages that a small amount of difference in range seems like it’s worth the tradeoffs.

For instance, Ford was able to lower the price of its Mach-E by $4,000 with the introduction of the LFP packs while still nominally increasing range (likely due to other factors). These batteries also charge faster and last longer. Also, the graphic above is something I found on the Ford media website and was too goofy not to use.

The future of the future is probably LFMP batteries, which use a bit of manganese in the mix to get an energy density closer to NCM or NCA lithium batteries. It’s a good enough solution that’s also cheap enough. Sounds like a winner to me.

The BYD Dolphin Is Coming To Europe

Oh, hey, BYD news. How timely. While the Biden Administration and a large chunk of automakers do all they can to make American-built cars the EVs of the future, Europe has been less well positioned to resist the pull of cheap Chinese cars.

While China’s BYD has all of us infatuated by the tiny and cheap Seagull, it’s the slightly larger Dolphin that’s packing its bags and heading to Europe. BYD announced that it’s bringing the C-Segment EV to the continent with deliveries starting later this year.

The big news here is the small price. A basically VW Golf-sized Dolphin will cost approximately between £25,490 to £30,990 (or about $32,500 to $40,000) and deliver a range between 193 and 265 miles on the WLTP standard.

By comparison, a comparable Volkswagen ID.3 PRO starts at $42,800 in Germany and only delivers about 266 miles of range.

The Big Question

Is this how you want to spend your hard-earned tax dollars? Is it worth it to compete with China’s dominance in the industry?

Photos: BYD, Ford, Bloomberg