Ford Motor said on Thursday that it had reached an agreement to acquire battery packs from a Chinese supplier as it races to ramp up its global production of electric vehicles.
The automaker said it would begin purchasing battery packs next year from Contemporary Amperex Technology Company Limited that will be used in electric vehicles produced in North America and other regions. The Chinese company, which is known as CATL, is the largest battery producer in the world and is often regarded as the most important player in the electric vehicle industry after Tesla.
The announcement underscores the dominant position of Chinese companies in the supply chain for electric vehicles, which are critical to the effort to rein in climate change and the ability of the world’s largest automakers compete with Tesla. China produces about 80 percent of the cells that power lithium ion batteries cells, according to Benchmark Intelligence, a research firm.
Ford also said it would buy more battery packs from two South Korean companies: LG Energy Solution and SK On, which has built a plant in Georgia and is working with Ford to build three others in the United States.
The agreements are all part of a push by Ford to be able to produce 600,000 electric vehicles a year by the end of 2023, which would be a steep increase from its current output level.
In addition to the deals with battery makers, the automaker said it was securing supplies of raw materials like lithium and nickel from countries like Canada, Indonesia and Australia by working directly with mining companies. Prices of those and other metals needed to make batteries have surged this year on strong demand from the auto industry and because of Russia’s war in Ukraine.
Ford was slow to embrace electric vehicles but has taken some ground this year from Tesla, which dominates the market. Two models account for most of Ford’s recent gains: the Mustang Mach E, an electric sport utility vehicle, and the F-150 Lightning, an electric version of its popular full-size pickup truck. In the first half of this year, Ford sold 17,675 Mach Es in the United States, and it sold 2,296 Lightnings between April, when production started, and the end of June.
Ford has said it wants to produce 270,000 Mach Es a year for North America, Europe and China by 2024, as well as 150,000 Lightnings in North America and 150,000 electric Transit vans for North America and Europe. It also aims to add a new electric S.U.V. in Europe and hopes to be able to make 30,000 a year by the end of 2024.
The company is adding battery suppliers in response to strong demand for its electric models, Ford’s chief executive, Jim Farley, said in a statement. “Now we are putting the industrial system in place to scale quickly,” he said.
Ford is also diversifying the types of batteries it is using. CATL will supply battery packs that use lithium iron phosphate, or LFP, battery cells that Ford will use to produce Mustang Mach Es in North America starting next year, and for F-150 Lightnings in 2024.
Ford said it had signed a memorandum of understanding with CATL to discuss further cooperation for batteries for Ford’s operations in China, Europe and North America. It added that it planned to add a North American source of LFP cells by 2026, but didn’t provide details.
Tesla has also recently begun relying more on LFP batteries, which cost less than batteries that rely on raw materials like nickel but cannot hold as much energy. Ford said it expected the LFP cells to reduce battery material costs by 10 to 15 percent over cells it currently uses that include nickel, cobalt and manganese, or NCM.
The company said LG Energy Solution was increasing production of NCM batteries cells at a plant in Poland to provide batteries for the Mustang Mach E and E-Transit van.
SK On is working to increase output of NCM cells at its Georgia plant for the F-150 Lightning, Ford said. SK On and Ford previously announced plans to build two battery plants in Kentucky and a third in Tennessee.