Ford to scale back plans for $3.5 billion Michigan battery plant as EV demand disappoints, labor costs rise

In a strategic shift reflecting the evolving landscape of the automotive industry, Ford Motor is revising its ambitious plans for a $3.5 billion battery plant in Michigan. This decision comes in response to a slower-than-anticipated consumer transition to electric vehicles (EVs), coupled with rising labor costs and a corporate imperative to streamline expenses.

The initial announcement of the facility, made in February by key Ford figures including CEO Jim Farley and Chair Bill Ford, quickly drew attention due to its association with Chinese battery manufacturer Contemporary Amperex Technology Co., or CATL. While the plant operates as a wholly owned Ford subsidiary, it relies on technology licensing from CATL to manufacture cutting-edge lithium iron phosphate (LFP) batteries for electric vehicles.

On Tuesday, Ford disclosed a significant scaling back of its production capacity, reducing it by approximately 43% to 20 gigawatt hours per year. Simultaneously, the expected employment figures were adjusted from 2,500 jobs to 1,700 jobs. The company has refrained from specifying the exact reduction in investment, but given the revised capacity, estimates suggest it could still amount to a substantial $2 billion commitment.

This decision aligns with a broader trend of automakers globally reassessing their commitments to electric vehicles. Demand for EVs has not surged as anticipated, with factors such as elevated costs, supply chain challenges, and complexities in battery technologies contributing to the subdued market reception.

Beyond the adjustments in Michigan, Ford’s recent strategic shifts in the electric vehicle domain include plans announced last month to trim or defer around $12 billion in previously earmarked EV investments. This includes a postponement of the construction of another electric vehicle battery plant slated for Kentucky.

As the automotive industry grapples with the dynamic landscape of electric mobility, Ford’s recalibration underscores the delicate balance between ambitious aspirations for sustainable transportation and the pragmatic realities of market forces and economic considerations.