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Ford (F) Pauses $3.5B Battery Plant Amid EV Tech Conundrum
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Ford Motor Company (F - Free Report) has temporarily suspended its construction of a $3.5 billion electric vehicle (EV) battery plant in the Marshall area of Michigan. The automobile major has taken this decision amid months of confrontation with local residents, criticism over its use of Chinese technology and the ongoing auto workers strike.
In July, Ford had forecast a full-year loss of $4.5 billion on its EV unit and said it was slowing its EV production ramp-up. The company also mentioned that it plans to quadruple the sales of gas-electric hybrids over the next five years. This came on the back of the U.S. Congress passing the $430 million Inflation Reduction Act, which discourages domestic companies from using technology from a “foreign entity of concern.”
This meant that Ford would have to rethink its tech strategy for battery manufacturing, which is indelibly linked to China. Also, not helping is the stance taken by the United Auto Workers (“UAW”), who want automakers to pay workers at battery plants the same wages that workers at assembly and engine plants receive.
This decision from Ford might be the first of many logistical hurdles that the EV industry faces in its nascent stage. China-U.S. relations are currently at a five-decade low. Moreover, China holds a superior position in the EV supply chain, with about three-quarters of the world's battery production capacity. Also, China houses the lion’s share of the world's processing and refining capacity for lithium, cobalt and graphite; essential materials for making EV batteries. If this tech war continues, the United States will have to fill the gap with affordable alternatives. And this is not even taking into consideration the labor activism it faces currently.
Ford’s expected earnings growth rate for the current year is 12.2%. The Zacks Consensus Estimate for its current-year earnings has increased 12.2% over the past 60 days. It currently carries a Zacks Rank #3 (Hold).
One of Ford’s rivals, General Motors Company (GM - Free Report) , which has also been hit by the UAW strike and the battery tech issue, has been more forthcoming on the latter topic. Gil Golan, the company’s new chief technology officer, has suggested that GM should make its own batteries.
General Motors’ expected earnings growth rate for the current year is 2%. The Zacks Consensus Estimate for its current-year earnings has not changed over the past 60 days. It currently carries a Zacks Rank #3 (Hold).
However, Elon Musk, co-founder and CEO of one of the largest players in the EV segment, Tesla, Inc. (TSLA - Free Report) , has been more vocal lately about the UAW strike. He has cautioned that if the union's demands for higher wages are met, automakers like General Motors and Ford could go bankrupt, and fast.
Tesla’s expected earnings growth rate for the current year is -15%. The Zacks Consensus Estimate for its current-year earnings has increased 0.3% over the past 60 days. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The industry is at a crossroads, it may seem. The nation’s relationship with China, the manufacturers’ relationship with its labor forces, and the government’s determination to resolve issues will dictate the path forward. But with global consensus on EVs being the need of the hour, the world’s eyes would be on how the situation develops in the segment.
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Ford (F) Pauses $3.5B Battery Plant Amid EV Tech Conundrum
Ford Motor Company (F - Free Report) has temporarily suspended its construction of a $3.5 billion electric vehicle (EV) battery plant in the Marshall area of Michigan. The automobile major has taken this decision amid months of confrontation with local residents, criticism over its use of Chinese technology and the ongoing auto workers strike.
In July, Ford had forecast a full-year loss of $4.5 billion on its EV unit and said it was slowing its EV production ramp-up. The company also mentioned that it plans to quadruple the sales of gas-electric hybrids over the next five years. This came on the back of the U.S. Congress passing the $430 million Inflation Reduction Act, which discourages domestic companies from using technology from a “foreign entity of concern.”
This meant that Ford would have to rethink its tech strategy for battery manufacturing, which is indelibly linked to China. Also, not helping is the stance taken by the United Auto Workers (“UAW”), who want automakers to pay workers at battery plants the same wages that workers at assembly and engine plants receive.
This decision from Ford might be the first of many logistical hurdles that the EV industry faces in its nascent stage. China-U.S. relations are currently at a five-decade low. Moreover, China holds a superior position in the EV supply chain, with about three-quarters of the world's battery production capacity. Also, China houses the lion’s share of the world's processing and refining capacity for lithium, cobalt and graphite; essential materials for making EV batteries. If this tech war continues, the United States will have to fill the gap with affordable alternatives. And this is not even taking into consideration the labor activism it faces currently.
Ford’s expected earnings growth rate for the current year is 12.2%. The Zacks Consensus Estimate for its current-year earnings has increased 12.2% over the past 60 days. It currently carries a Zacks Rank #3 (Hold).
One of Ford’s rivals, General Motors Company (GM - Free Report) , which has also been hit by the UAW strike and the battery tech issue, has been more forthcoming on the latter topic. Gil Golan, the company’s new chief technology officer, has suggested that GM should make its own batteries.
General Motors’ expected earnings growth rate for the current year is 2%. The Zacks Consensus Estimate for its current-year earnings has not changed over the past 60 days. It currently carries a Zacks Rank #3 (Hold).
However, Elon Musk, co-founder and CEO of one of the largest players in the EV segment, Tesla, Inc. (TSLA - Free Report) , has been more vocal lately about the UAW strike. He has cautioned that if the union's demands for higher wages are met, automakers like General Motors and Ford could go bankrupt, and fast.
Tesla’s expected earnings growth rate for the current year is -15%. The Zacks Consensus Estimate for its current-year earnings has increased 0.3% over the past 60 days. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The industry is at a crossroads, it may seem. The nation’s relationship with China, the manufacturers’ relationship with its labor forces, and the government’s determination to resolve issues will dictate the path forward. But with global consensus on EVs being the need of the hour, the world’s eyes would be on how the situation develops in the segment.