US government announces $9.2 billion loan for Ford-SK On battery joint venture

Policy & Regulation

The US DOE’s loan to BlueOval SK is the largest investment the government agency has ever made through its funding program to any automaker

Source: Getty Images

The US Energy Department (US DOE) plans to provide a loan of $9.2 billion to the Ford Motor — SK On battery joint venture, which is building battery manufacturing facilities in Kentucky, US, and Tennessee, US, according to a news report published by The Detroit News on June 22.

The report pointed out that the loan accounts for a majority of the $11.4 billion in investments that the two companies have committed to spend in the project over years.

Notably, the loan to BlueOval SK from the US government is expected to support the venture's three upcoming battery manufacturing facilities — one in Tennessee and two in Kentucky. Moreover, the automaker estimates that these projects will create up to 11,000 jobs and build more than 120 GWh of battery production capacity per annum.

Citing Jigar Shah, director of the Loan Programs Office at the US DOE, the news report said, “The goal is twofold: One is to get people to choose the US over other countries they may have put this infrastructure in originally, and two is to get them to move faster because the terms alone make it possible to take bolder action. I think both of those things were true in this case.”

The US DOE has received an additional $40 billion in loan authority from the Inflation Reduction Act, which aims to accelerate the electric vehicle transition.

Interestingly, the report mentioned that the funding does not add to the JV’s previously announced $11.4 billion investment. Instead, it will replace a portion of it, leaving Ford and SK to use $9.2 billion they would have otherwise borrowed or spent on it for other investments.

Significance: According to the news report, the loan from US DOE marks the most significant direct government support for an auto company since the bailouts during the great recession. This is also the largest single loan the US DOE has ever made, it added.

The government support for the Ford — SK On battery venture in the US comes at a time when the Biden administration is pushing automakers to rapidly scale up EV production in an attempt to compete with China.

It is known that China remains as the world’s largest EV market.

Comparing the financial support offered to other automakers, the report said that the loan to BlueOval SK is the largest investment the agency has ever made through the program. The US DOE had provided General Motors’ Ultium Cells LLC — a battery JV between GM and LG Energy Solution — $2.5 billion in November 2022.

The government agency had also previously given Ford $5.9 billion in 2009 to finance projects to increase fuel efficiency in gas-powered cars. It also provided $1.45 billion in funding support to Nissan and $465 million to Tesla Inc. in 2010.

The report stated that the 3,600-acre campus in West Tennessee, BlueOval City, will be Ford's largest manufacturing complex. The facility will encompass a battery plant jointly operated by Ford and SK, an assembly plant that will build next-generation electric F-Series trucks and a supplier park, among other facilities. The EV assembly plant is slated to have a production capacity of 500,000 units per year. Executives told the publication that the project is on track for a 2025 opening.

BlueOval City and BlueOval SK Battery Park, the facilities that will be home to two EV battery plants, are key elements of Ford's $50 billion electrification plan. As part of this plan, Ford aims to produce 2 million EVs per annum by the end of 2026.

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