Ford's Michigan Battery Plant Faces Uncertain Future Due to Tax Credit Cuts

Ford's ambitious plans to construct a joint battery plant with Chinese battery manufacturer CATL in Michigan are facing significant challenges. The facility, valued at $3 billion, was intended to produce 20 gigawatt-hours of lithium iron phosphate (LFP) batteries and create approximately 2,000 jobs by 2026. However, the project's future is now uncertain due to potential reductions in tax credits proposed by President Donald Trump's economic package. These credits are crucial for the financial viability of the plant, which has already faced political scrutiny since 2023 due to Ford's licensing of battery technology from CATL.

LFP batteries are highly sought after for their cost-effectiveness and durability, as they do not require expensive materials like nickel and cobalt. However, the slower-than-expected growth in electric vehicle (EV) sales has forced Ford to scale back its plans for the BlueOval Battery Park in Marshall, Michigan. The investment has been reduced to around $2.2 billion, and the number of jobs has been cut from 2,500 to 1,700. Additionally, the promised incentives for the plant have been halved from $1 billion to $500 million.

The political scrutiny surrounding the plant's connection to CATL, which has alleged ties to the Chinese Communist Party, continues to be a contentious issue. The proposed economic package by President Trump threatens to slash manufacturing credits, which would significantly impact Ford's ability to build the plant. Bill Ford, the executive chairman of the automaker, has expressed concern over the potential demise of these credits, stating that changing the rules after investments have been made is unfair.

Ford's Michigan battery plant is crucial for bringing down the price of EVs to gas-car levels, as high purchase prices remain the biggest barrier to mainstream EV adoption. If the plant collapses, it would make it harder for LFP batteries to be manufactured in America, which is ultimately what lawmakers want. Another battery manufacturer, Automotive Energy Supply Corp. (AESC), has also faced setbacks in its U.S. battery manufacturing plans due to import tariffs and policy changes targeting EVs. AESC has halted construction on two plants in Kentucky and South Carolina, and its existing plant in Tennessee has been repurposed to make industrial energy solutions instead of EV battery packs.

The cooling demand for EVs in the U.S. and policy changes that specifically target EVs have further disincentivized the creation of new manufacturing for the EV supply chain. The proposed rollback of some emissions standards and goals will likely exacerbate this trend, making it even more challenging for companies like Ford to invest in battery manufacturing in the U.S. The future of Ford's joint battery plant with CATL remains uncertain, and the company's plans to create thousands of jobs in Michigan may never materialize if the proposed tax credit reductions go through.