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Ford JV secures record US$9.2bn loan for EV batteries

Ford Ford Motor’s joint venture, BlueOval SK, is set to receive a historic loan of US$9.2 billion from the Department of Energy (DOE) to support the construction of battery plants in Tennessee and Kentucky. These battery plants are crucial for Ford’s ambitious expansion into electric vehicles (EVs) and represent the largest single investment in the DOE’s Loan Programs Office’s nearly two-decade history.

This substantial loan commitment is part of a larger clean-energy investment wave fueled by the Inflation Reduction Act, a climate law enacted last year. The legislation has empowered the DOE’s Loan Programs Office to allocate funds to critical infrastructure projects, accelerating the transition towards sustainable energy solutions.

The loan will support BlueOval SK, a joint venture between Ford and South Korean battery manufacturer SK On.

The $11.4 billion venture, finalised in 2022, encompasses two battery plants in Kentucky and one in Tennessee. These facilities will contribute to the emerging battery and EV manufacturing belt in the Southern United States, which has been bolstered by tax credits and other incentives provided under the climate law. Notably, the EV tax credits are contingent on the domestic sourcing of materials and batteries.

The race to develop batteries and EVs outside of China, a dominant force in global supply chains, has gained momentum due to the climate law’s influence. Countries like Europe and Canada have also implemented their own incentive programs to attract corporate investments in the clean energy sector.

Ford, headquartered in Dearborn, Michigan, has previously received government funding to enhance its environmentally friendly vehicle lineup. During the 2009 financial crisis, Ford secured a $5.9 billion loan from the Energy Department to upgrade its U.S. factories for electric motor production and improve fuel efficiency across various car models. While the company later shifted its focus to trucks and SUVs in response to consumer demand, it fully repaid the loan in 2022.

BlueOval SK must fulfil specific conditions outlined in agreements with the Loan Programs Office before accessing the government funds. Ford plans to invest $7 billion in the joint venture, while SK will contribute $4.4 billion. When the partnership was announced in late 2021, Ford declared its investment to be the largest-ever one-time manufacturing commitment by any automotive manufacturer in the U.S.

The BlueOval SK joint venture is a critical component of Ford’s ambition to ramp up global EV production to two million vehicles per year by the end of 2026. In addition to the battery plants, Ford is constructing an EV truck facility that is projected to manufacture 500,000 electric trucks annually.

In recent months, the Loan Programs Office has made significant commitments in the battery industry. This includes an $850 million pledge to battery maker Kore Power for a manufacturing plant in Phoenix. The office has also allocated over $3 billion to companies involved in battery materials and recycling.

While the office faced criticism in the past, notably after the bankruptcy of Solyndra, a solar-panel manufacturer it backed, its role has been revitalized under the leadership of Jigar Shah, a former solar entrepreneur who assumed the position of director in 2021. The office offers favorable borrowing terms to companies engaged in the development of important energy technologies, serving as a catalyst for their growth.

Ford’s partnership with SK On and the record loan from the DOE highlight the auto industry’s ongoing commitment to EV adoption and the transition to sustainable transportation. With the support of government funding and a rapidly expanding EV manufacturing infrastructure, Ford aims to solidify its position as a leader in the electric mobility revolution.