Ford Dials Back its EV Battery Production Plans Amid Dropping Demand, Rising Labor Costs

American automaker Ford is scaling back plans to build a massive electric vehicle plant in Michigan amid rising labor costs and decreasing demand for electric vehicles. Consumer demand for electric vehicles has dropped significantly in recent months, thanks to high EV costs coupled with rising interest rates. These issues are forcing automakers such as Ford and Tesla to make significant changes in an attempt to remain competitive.

However, even lower prices and government incentives haven’t been enough to convince buyers to purchase battery electric cars (BEVs). Car dealerships are reporting rising numbers of unsold electric cars on their lots, and many automakers have begun to dial back their ambitious electrification plans. Similarly, Ford now wants to scale back the development of a $3.5 billion EV battery plant in Michigan due to the slower-than-anticipated consumer transition to electric cars.

Announced in February, the planned Michigan plant attracted plenty of political discourse, thanks to a licensing deal with Chinese battery manufacturing giant Contemporary Amperex Technology Co. (CATL). While the plant would be a wholly owned Ford subsidiary, Ford would license technology from CATL to develop new lithium iron phosphate (LFP) electric vehicle batteries.

Thanks to unfavorable market conditions, Ford said it is cutting production at the battery plant by around 43% to 20 gigawatt hours annually and reducing the number of expected jobs from 2,500 to 1,700. Ford’s chief communication officer Mark Turby noted that the company analyzed pertinent factors such as demand, expected EV growth, production cycle and business plans, and affordability to gauge the Michigan plant’s financial feasibility.

Based on the findings, the company will advance its plans with the battery facility but at a smaller size and scope, Turby explained. Although the automaker didn’t disclose its total planned investment in the battery plant, estimates based on the reduced capacity put the investment at around $3 billion. Ford is among the latest companies to step back from their ambitious electrification plans in the wake of critical issues such as supply chain challenges, high costs and waning demand. In addition to scaling back production at the Michigan plant, Ford will also postpone construction of an EV production facility in Kentucky.

Ford stopped construction at the facility for half a month during talks with the United Auto Workers, but the company still expects to open the Michigan battery plant in 2026. The talks resulted in a deal that included a major wage increase for auto employees and created a path for employees at the battery plant to join the agreement.

As auto industry giants such as Ford stutter in their electrification plans, more nimble startups such as Mullen Automotive Inc. (NASDAQ: MULN) can take advantage of the situation and establish themselves on the market while the industry grows in different regions.

NOTE TO INVESTORS: The latest news and updates relating to Mullen Automotive Inc. (NASDAQ: MULN) are available in the company’s newsroom at https://ibn.fm/MULN

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