Ford and Tesla are pursuing ways to enter the energy storage system (ESS) battery market. As U.S. automakers move in as new competitors to Korean battery makers targeting the U.S. ESS market to make up for worsened results amid the recent electric vehicle market slump, they have emerged as new rivals.
On Feb. 6, the New York Times (NYT) reported that Ford is considering converting existing electric vehicle battery production lines into lines for large-scale ESS batteries for data centers and public facilities.
Earlier, in Dec. last year, Ford decided to dissolve BlueOval SK, its U.S. battery joint venture with SK On. In 2022, the two companies each invested $5.7 billion (about 8.4 trillion won) to build three plants in Tennessee and Kentucky to produce batteries for Ford electric vehicles.
However, as the two companies decided to liquidate the joint venture, SK On will operate the Tennessee plant set to start up next year, and Ford will operate the Kentucky plant. Ford's Kentucky Plant 1 began operations in Aug., and investment in Plant 2 was halted. Ford plans to make ESS batteries at the Kentucky plant using technology from Chinese battery maker CATL.
Tesla also plans to expand investment in the ESS battery business. At a plant under construction in Houston, it will begin producing ESS batteries by the end of this year.
Tesla's ESS installation capacity last year was 46.7 gigawatt-hours (GWh), up 49% from the previous year. During last month's conference call announcing the previous year's results, Tesla also said the ESS business, including batteries for homes and corporations and batteries for solar panels, would become the most profitable and fastest-growing area going forward.
U.S. automakers are eyeing the ESS battery market as power demand is surging, centered on data centers, due to the recent expansion of the artificial intelligence (AI) industry.
Korean battery makers, which struggled with poor results due to the electric vehicle market slump, have already moved to target the U.S. ESS market. LG Energy Solution won orders for 90 GWh of ESS batteries last year. SK On set a goal of securing orders for more than 20 GWh of ESS this year. Samsung SDI also accelerated efforts by winning orders for ESS batteries in the United States on Jan. 30.
In the battery industry, many say it will be difficult for Ford and Tesla to compete with Korean manufacturers in the short term. Ford and Tesla have collaborated with or procured equipment from Chinese battery company CATL, but with the United States strictly restricting the entry of Chinese products, it is not easy to secure technology.
In Ford's case, it had planned to produce ESS lithium iron phosphate (LFP) batteries at the Kentucky plant using CATL's technology. In connection with this, the U.S. House of Representatives reportedly sent a letter to Ford asking it to explain details of its collaboration with CATL.
Ford signed a licensing agreement under which CATL would provide only technology without participating in battery plant investment or operations, but U.S. political circles are concerned that CATL may have found a workaround to evade U.S. government restrictions. Tesla also purchased equipment related to battery production from CATL, making it a potential target of investigation.
A securities industry official said, "It will take time for U.S. automakers such as Ford and Tesla to properly enter the ESS market." The official added, "However, if the number of competitors increases, the share available to Korean manufacturers will inevitably shrink," and, "They will have to boost product competitiveness and widen the technology gap to survive in the ESS market for a long time."