Policy Crossroads: How EV Tax Credit Uncertainty Threatens Ford's Michigan Battery Plant and Supply Chains

The U.S. Senate's recent approval of a budget bill ending federal EV tax credits by September 30, 2025, has thrown automakers like Ford into a high-stakes game of regulatory whack-a-mole. Nowhere is this more acute than at Ford's $11.4 billion Michigan Blue Oval City complex, a flagship project designed to produce electric trucks and batteries for the F-150 Lightning and other models. The plant's fate—and that of similar EV manufacturing hubs—hinges not just on market demand, but on the volatile interplay between congressional policy debates and supply chain realities.

The Policy Double Bind
Congressional wrangling over tax credits and tariffs has created a dual threat to Ford's Michigan project. First, the abrupt termination of the $7,500 federal EV tax credit (and $4,000 credit for used EVs) by September 2025 eliminates a critical sales incentive. Analysts estimate that losing this credit could reduce consumer demand for Ford's EV trucks by 15-20%, squeezing margins on vehicles already priced 20-30% higher than their gas-powered counterparts. Second, the bill's “foreign entity of concern” (FEOC) restrictions penalize automakers relying on components sourced from nations like China, which supplies 80% of the world's lithium processing capacity and 60% of EV battery cells.

Ford's Michigan plant exemplifies this tension. While its Ultium batteries (co-developed with GM) aim to use North American-sourced materials, nearly half of its EV supply chain nodes—including cathode minerals, semiconductors, and rare earth magnets—still depend on Chinese suppliers. Even a single component failing FEOC compliance could disqualify an entire vehicle from eligibility for remaining state-level incentives or federal manufacturing credits, triggering penalties under Section 6695B that could cost up to 10% of claimed tax benefits.

The Supply Chain Tightrope
The bill's escalating domestic content requirements—rising to 55% for solar, 85% for wind, and 60% for battery modules by 2026—force automakers to accelerate reshoring efforts. For Ford, this means speeding up its $1.8 billion investment in a Tennessee cathode plant and its partnership with Controlled Thermal Resources for California-based lithium. Yet these projects face permitting delays, labor shortages, and the risk of stranded costs if FEOC rules tighten further.

Consider cobalt, a critical battery material where 70% of global production comes from the Democratic Republic of Congo. Ford's recent cobalt-sourcing deal with a Congolese miner faces scrutiny under FEOC rules if the miner's Chinese joint venture exceeds the 25% ownership threshold. Such compliance hurdles could force Ford to pay a premium for “clean” materials—potentially $500-$1,000 per vehicle—or absorb penalties.

Investment Implications: Play Defense First
Investors in Ford and other automakers must now treat policy uncertainty as a core risk factor. Key red flags include:
- Supply Chain Diversity: Companies with >40% of critical minerals sourced from FEOC nations face higher penalties.
- Lobbying Influence: Firms with strong Washington ties (e.g., GM's bipartisan lobbying team) may secure carve-outs in final rules.
- State-Level Credits: States like California and New York offer EV incentives unaffected by federal cuts—prioritize automakers dominant in these markets.

The Bottom Line
Ford's Michigan plant symbolizes the EV industry's gamble on policy stability. While the plant's 15 GWh battery capacity and 30,000 jobs represent a bet on U.S. EV leadership, the Senate's abrupt tax credit termination and FEOC rules could turn it into a liability if supply chains falter. Investors should favor automakers with diversified supply chains (e.g., Tesla's domestic lithium partnerships) or those negotiating bipartisan support for delayed compliance deadlines. For now, the EV sector's growth story is as much about navigating Washington's whims as it is about battery chemistry.