Ford Motor Co. is making adjustments to its battery plant project in Michigan as it anticipates weaker demand for electric vehicles (EVs). The company announced on Tuesday that it will be reducing the planned capacity and workforce at the Marshall factory, which had been put on hold two months ago. The factory, set to open in 2026, will now produce batteries for approximately 230,000 EVs annually, significantly lower than the initial target of 400,000. The employment projection has also been revised down to 1,700 workers, compared to the original plan of hiring 2,500.
These changes reflect a wider retrenchment by Ford in its EV strategy. The automaker has postponed $12 billion in spending on battery-powered models and no longer has a set timeframe for reaching its goal of manufacturing 2 million EVs per year by 2026. Sales of its flagship EV, the F-150 Lightning plug-in pickup, declined by 46% in the third quarter.
Mark Truby, Ford's Chief Communications Officer, acknowledged that EV adoption has not grown as quickly as anticipated, stating, "We want to be really disciplined about how we allocate capital and think about matching production and future capacity based on demand."
The revised plans for the battery plant lead to a reduction in investments. Ford expects a decrease in the overall spending from the initially estimated $3.5 billion to approximately $2 billion. This decision was made after reaching a labor agreement with the United Auto Workers union, which resulted in a 25% increase in wages to $42 per hour. While the Marshall plant is not yet unionized, it is expected to be targeted by the UAW for inclusion under its master labor agreement.
While the battery plant will be entirely owned by Ford, it will license technology from China's Contemporary Amperex Technology Co. (CATL). Despite concerns raised by lawmakers about CATL's alleged affiliation with the Chinese Communist Party, Ford believes the batteries produced at the Marshall facility will qualify for subsidies under President Joe Biden's Inflation Reduction Act, a key environmental legislation.
"We're confident in terms of the IRA benefits," Truby stated. "We believe bringing in a factory that's a wholly owned Ford factory, setting up production in Michigan" with CATL as "a technology partner is a far better approach."
Ford's shares experienced a decline following the announcement, falling as much as 2.3% in New York trading. The company's shares have already dropped by 11% this year. As the EV industry faces some headwinds, Ford's strategic adjustments highlight the need for automakers to closely align production capacity with market demand.