Ford Motor and its battery manufacturing partner will receive a $9.2 billion loan to build three battery plants in Kentucky and Tennessee, the Department of Energy said Thursday. The loan is the largest financial commitment made by the Biden administration in its effort to build an electric vehicle production network in the United States.
The loan will go to a joint venture set up by Ford and its partner SK On called BlueOval SK, which will supply batteries for Ford and Lincoln electric cars and trucks. The plants, one in Tennessee and two in Kentucky, will employ 7,500 people and are among the largest such plants built by auto and battery companies nationwide, especially in the Southern states. They are scheduled to begin production in 2025.
President Biden aims to have half of new cars sold in the United States be electric by the end of the decade, up from about 7 percent in the first three months of this year. By helping to fund battery factories, the government hopes to ensure that the United States does not become dependent on China for batteries and their components. The administration also hopes the new factories will help make up for lost jobs in conventional car manufacturing.
One of the plants will be in Stanton, Tennessee, north of Memphis, next to a large manufacturing complex that Ford is building to produce electric pickups. The other two plants are in Glendale, Ky., south of Louisville, and will employ more people than Kentucky’s coal industry.
Ford is also spending $3.5 billion to build a battery factory in Marshall, Michigan, which will use technology from Contemporary Amperex Technology Ltd., a Chinese company known as CATL, the largest battery manufacturer in the world. Ford’s deal with CATL, announced in February, was met with political backlash from some Republican lawmakers who criticized Ford for working with a company close to the Chinese government.
Senator Joe Manchin III, a conservative Democrat from West Virginia, also criticized the agreement, which makes Ford vehicles using CATL technology eligible for federal tax credits.
BlueOval’s loan will come through the Energy Department’s Loan Programs Office, which the department says has provided more than $35 billion in loans and loan guarantees for more than 30 projects over the past 14 years. The agency was created to provide loans to experimental and large-scale projects with flexible funding that private lenders will not provide.
“The goal is to help people choose the United States for their manufacturing facilities and do so more quickly than they otherwise would,” says Jigar Shah, director of the loan programs agency. “We are excited.”
BlueOval SK will pay the same interest the federal government pays to borrow from investors, said Mr. Shah, a much better rate than would normally be available to a company. Ford and SK, based in South Korea, also have to meet certain conditions to collect the money, usually with the filing of paperwork.
“This is a big step in allowing an automaker to bring its supply chain to the United States so we can have more control over our future,” said Doug Lewin, president of Stoic Energy, a consulting firm.
Since Mr Biden was elected, the program has provided funding to nuclear power plants, solar and wind projects and domestic production of electric vehicle batteries. The loan bureau was effectively doomed during the Trump administration.
From 2009 to 2011, when Barack Obama was president, the office made $16 billion in clean energy loans, about 90 percent of which went to power plants. Beneficiaries included financial firms such as Goldman Sachs and utilities such as Exelon and NRG.
The office faced scathing Republican criticism for backing Solyndra, a start-up that received a loan guarantee of more than $500 million in 2009 to develop advanced solar technology, but ceased operations in 2011.
Mr Shah said his office had a much larger workforce to research projects before granting loans compared to 2009.
“We have to take risks,” he said. “That’s how we help American innovators and entrepreneurs build these first facilities — these great forward-looking projects for our national security — and get things done.”
For companies such as Ford and SK, borrowing from the Energy Department is attractive because the agency offers better terms than private lenders and is more willing to take on risky and expensive projects.
“It’s a debt you don’t have to pay back if you fail,” says Michael Webber, a mechanical engineering professor at the University of Texas at Austin. “That’s a huge advantage for capital-intensive industries.”
Perhaps the biggest success of the loan program was a $465 million loan to Tesla in 2010, when the electric car company was still struggling to prove itself. The money helped the company produce its Model S sedan at a factory in Fremont, California. Tesla repaid the loan early in 2013 and has become the most valuable carmaker in the world in recent years.
In December, the Energy Department lent $2.5 billion to a joint venture between General Motors and LG Energy Solution that will produce batteries for electric vehicles at plants in Ohio, Tennessee and Michigan.
In February, the department announced a $2 billion loan to help Redwood Materials expand a manufacturing facility near Reno, Nevada, to produce battery materials from new and recycled sources. Redwood is led by a former Tesla executive, JB Straubel.
