Ford dramatically scales back EV plant amid plummeting sales in blow to Biden's green energy goals

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U.S. automaker Ford Motor Company is dramatically scaling back an electric vehicle (EV) battery plant under construction in Michigan as its EV business continues to lose billions of dollars.

In an announcement Tuesday, Ford said it would resume the Marshall, Michigan, project, but reduce its scope by more than 40% and the number of jobs it is projected to create by more than 30%. Ford, which has struggled to make a profit from its ongoing shift to EVs as sales decline and costs soar, added that it remained confident in the future viability of its EV business.

"While we remain bullish on our long-term strategy for electric vehicles, we are re-timing and resizing some investments," Ford said in a statement Tuesday. "As stated previously, we have been evaluating BlueOval Battery Park Michigan in Marshall."

"We are pleased to confirm we are moving ahead with the Marshall project, consistent with the Ford+ plan for growth and value creation," it continued. "However, we are right-sizing as we balance investment, growth, and profitability. The facility will now create more than 1,700 good-paying American jobs to produce a planned capacity of approximately 20 GWh."

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Ford CEO Jim Farley announces at a press conference that his company will be partnering with China-based company Contemporary Amperex Technology to construct an electric-vehicle battery plant in Marshall, Michigan, on Feb. 13. (Bill Pugliano/Getty Images)

The automaker added that the facility is still expected to be Ford's first battery plant of its kind to enter operations when it is scheduled to open in 2026. The plant will, once it is operational, manufacture lithium iron phosphate batteries common in EVs.

Ford's decision to decrease the size of the factory comes less than a year after it first announced the project alongside Democratic Michigan Gov. Gretchen Whitmer. Ford pledged in February to invest $3.5 billion in the factory, create 2,500 "good-paying jobs" and have a gigawatt capacity of 35 gigawatt hours.

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"Today’s generational investment by an iconic American company will uplift local families, small businesses, and the entire community and help our state continue leading the future of mobility and electrification," Whitmer said at the time. "Let’s continue bringing the supply chain of electric vehicles, chips and batteries home while creating thousands of good-paying jobs and revitalizing every region of our state."

The Whitmer administration also agreed to help fund the project with nearly $2 billion in direct subsidies and tax breaks. It is unclear if the state will lower its subsidy levels for the project in light of Tuesday's announcement. Whitmer's office didn't respond to a request for comment.

Gov. Gretchen Whitmer speaks at a press conference where it was announced that Ford would develop an electric-vehicle battery plant in Marshall, Michigan. (Bill Pugliano/Getty Images)

"The bad deal the governor and Democrats negotiated for Michigan taxpayers just got a whole lot worse," Michigan state House Republican Leader Matt Hall said in a statement. "Even with Democrats’ premature push for electric vehicles and $1.8 billion in state incentives, Ford is cutting back the project and slashing job creation because most people just won’t buy unaffordable, inconvenient EVs."

"Gov. Whitmer was desperate to land a Ford plant after losing out to more economically competitive states, so she rammed through an expensive deal to get a handful of low-wage jobs," he added. 

"This deal was a disaster from the start, and now Ford is cutting job plans by 32%. If the original proposal misrepresented Ford’s plans, the hundreds of millions of dollars tied to job creation should be revoked under the contract. The governor must right-size state funding and ensure taxpayers aren’t left on the hook for her failure."

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Ford projected earlier this year that its EV division was projected to lose a staggering $4.5 billion in 2023 alone despite higher revenues. And last month, the company reported a loss of $1.3 billion in its EV division during the third quarter, the period between July and September, which amounts to a $62,016 loss per EV sold in that time span.

The company's announcement Tuesday further represents a blow to President Biden's green energy agenda, which includes policies to promote the rapid growth of the EV industry. Biden has set the goal of ensuring half of all U.S. car purchases are zero-carbon by 2030 and his administration has taken action restricting future gas-powered vehicle sales.

CATL CEO Zeng Yuqun (Paul Zinken/picture alliance via Getty Images)

And Ford has also received widespread criticism and congressional scrutiny over its Marshall battery factory.

Ford said when it unveiled the project in February that it had reached an agreement with Contemporary Amperex Technology (CATL), a Ningde, China-based firm, to manufacture its battery cells at the plant using services provided by the Chinese company. Republicans and national security experts have blasted the company for teaming up with CATL, citing the firm's ties to the Chinese Communist Party.

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Although it is not state-owned, Chinese investors tied to the CCP have held financial stakes in CATL, according to a New York Times review. The Chinese government has also taken strategic steps over the last decade to bolster CATL and other electric vehicle industry companies based in China. 

In addition, Zeng Yuqun, who founded CATL in 2012 and remains its top executive, was identified last year as a member of the Chinese People's Political Consultative Conference (CPPCC) National Committee. According to a U.S. government report published in 2018, the CPPCC is a "critical coordinating body" that brings together representatives of Chinese interest groups and is led by the CCP’s Politburo Standing Committee.

The CPPCC highlighted Yuqun's work with CATL fortifying China's lithium supply chains, which are crucial for electric vehicle production and other green energy development.

President Biden previously set a goal of ensuring 50% of car purchases are electric by 2030. (Getty Images)

In September, a group of House Republicans – led by Energy and Commerce Chair Cathy McMorris Rodgers, R-Wash., and Energy and Commerce Oversight Subcommittee Chair Morgan Griffith, R-Va. – wrote to Ford CEO Jim Farley, expressing concern over the proposed plant.

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"While Ford has labeled this project a 'commitment to American manufacturing' and asserts it will create 2,500 new American jobs, we are concerned that Ford’s partnership with a Chinese company could aid China’s efforts to expand its control over United States electric vehicle supply chains and jeopardize national security by furthering dependence on China," they stated in their letter.

"Should China gain control of domestic electric vehicle production, the United States would be exposed to serious national security risks at a time of escalating geopolitical tensions."

GOP leaders on the House Ways and Means Committee and the House Select Committee on the Chinese Communist Party have raised concerns about the project in separate inquiries to Ford.