May 22 (Reuters) – Ford Motor Co (F.N) on Monday unveiled new supply deals for battery-grade lithium as the U.S. automaker aimed to meet its target of producing 2 million electric vehicles by 2026, closing the gap on market leader Tesla Inc (TSLA.O).
Ford is holding an investor event Monday explaining how it plans to make money and ramp up production of its next-generation electric vehicles as it works to address a current significant cost disadvantage against competitors.
CEO Jim Farley said the automaker is outlining for investors “big bets we’re making – different bets than some others”.
North American automakers are racing to secure supplies of battery materials to boost EV output as demand surges for environment-friendly vehicles, and to take advantage of tax credits offered by the U.S.
The deals announced Monday mark an expanded bet by Ford on direct lithium extraction (DLE) technology, an emerging crop of unproven filtration technologies aimed at revolutionizing how the metal is produced for the EV industry.
Under their terms, Albemarle Corp (ALB.N) and Nemaska Lithium will supply lithium hydroxide, a primary ingredient in the cathode of lithium-ion batteries, over a period of five and 11 years respectively.
Albemarle will supply more than 100,000 metric tons of lithium hydroxide for approximately 3 million future Ford EV batteries, the companies said.
In early trading Albemarle shares rose 2.4% to $208.42, while Ford shares fell 1.9%.
Ford vice president Lisa Drake said the agreements carried significantly less risk that relying on investments in junior producers.
Lithium, a key component in most modern EV batteries, has a higher energy density that traditional battery inputs, making it possible to keep batteries compact with higher storage capacity, crucial to ensure long distances between charging.
Under other deals, privately held EnergySource Minerals will supply Ford with lithium hydroxide from its Imperial Valley, California site, which is expected to be operational in 2025, it said, while Compass Minerals (CMP.N) will provide lithium carbonate.
The agreements announced on Monday also come as doubts linger on Wall Street about legacy automakers’ ability to hit the lofty targets set for EV production. Ford has said it would have a global capacity to build 600,000 EVs by the end of 2023.
The U.S. automaker on Monday reaffirmed its full-year forecast of $9 billion to $11 billion of adjusted earnings before interest and taxes and about $6 billion in adjusted free cash flow. It continues to expect its electric vehicle unit to lose $3 billion this year.
Ford said its next-generation electric truck will have a 30% lower labor and overhead cost than its current gas-powered truck.
Nemaska Lithium is equally owned by the Quebec government’s economic development agency Investissement Quebec and lithium company Livent (LTHM.N). Ford will be its first customer.
Chile’s SQM (SQMA.SN), the world’s second-largest lithium producer after Albemarle, signed its own long-term supply agreement with Ford on Monday, though neither company specified the number of years.