Ford gets a loan, massive incentives, and government pressure on how to spend the money. Effectively, the US government is now in the car and battery making business.
Ford Headline Comparison
- Bloomberg: Ford Gets $9.2 Billion to Help US Catch Up With China’s EV Dominance
- Wall Street Journal: At Ford, Government Is Now Job One
The Bloomberg story spins the news as a positive, the WSJ deeply negative. They agree on the amount and some details.
Bloomberg Snips
A deep-pocketed US government program designed to finance futuristic energy businesses is issuing a conditional $9.2 billion loan to Ford Motor Co. for the construction of three battery factories. The enormous loan — by far the biggest government backing for a US automaker since the bailouts in the 2009 financial crisis — marks a watershed moment for President Joe Biden’s aggressive industrial policy meant to help American manufacturers catch up to China in green technologies.
The new factories that will eventually supply Ford’s expansion into electric vehicles are already under construction in Kentucky and Tennessee through a joint venture called BlueOval SK, owned by the Michigan automaker and South Korean battery giant SK On Co. Ford plans to make as many as 2 million EVs by 2026, a huge increase from the roughly 132,000 it produced last year.
Ford’s cars and SUVs made with domestic batteries will also be eligible for billions of dollars in incentives embedded in the Inflation Reduction Act’s $370 billion in clean-energy funding, part of the historic climate measure narrowly passed into law about a year ago. The US government will subsidize manufacturing of batteries, and buyers could qualify for additional tax rebates of up to $7,500 per vehicle.
WSJ Snips
Remember when Ford’s slogan was “Quality is Job One”? Those were the days. Now pleasing the government is job one as the Detroit auto maker shovels up taxpayer subsidies to fuel its government-mandated electric-vehicle transition.
Buyers of Ford’s profitable and popular gas-powered trucks are subsidizing EVs. But this won’t last as Ford ramps up EV production to meet government mandates. The Biden Administration’s emissions rules require EVs to be 17% of sales in 2026 and two-thirds by 2032. They were about 3% last year.
Ford and other car makers aim to make EVs profitable through efficiencies from manufacturing scale. But until that distant day, they want government to subsidize the money-losing cars they’re required to make. The Inflation Reduction Act’s (IRA) $7,500 consumer tax credits are merely a down payment. Kentucky and Tennessee have also agreed to chip in some $2.7 billion for the three factories. Michigan has offered Ford $1.7 billion in incentives for a “collaboration” with China’s state battery champion CATL. Oh, and Ford can pocket IRA manufacturing tax credits, which shave a third off the cost of battery production.
The Mercatus Center’s Christine McDaniel estimates the IRA battery production tax credit will cost $152.8 billion—more than five times as much as Congress’s Joint Tax committee estimated last year. That’s because so many auto makers are rushing to cash in. But government subsidies always come with strings. The Energy Department hasn’t released the Ford loan terms, but the Administration has sought to attach project labor agreements, profit-sharing and child-care mandates to grants for chip makers.
Ford has already agreed to a union “neutrality” agreement at the battery factories that will make it easier for the United Auto Workers to organize workers. But the union wants more. The UAW agreements with the Big Three auto makers expire in September, and new union president Shawn Fain is using government subsidies in negotiations. Ford’s sweetheart loan follows National Security Adviser Jake Sullivan’s recent vow to “unapologetically pursue our industrial strategy at home.”
The climate agenda has turned the once great American auto industry into a too-willing prisoner of government.
Blue Oval Battery Park
The Inflation Reduction Act Delivers Inflation
The IRA battery tax credit has done from an initial estimate of $30 billion to $152 billion. Child care mandates and other union agreements will push up the cost on consumers.
And no one yet has factored in the cost of minerals to make the batteries. You can’t go from 3 percent of sales to 17 percent, then 67 percent and expect the price of the needed metals and rare earth elements to stay flat.
Of course, this assumes that customers will go along. But if they don’t, Biden will press for still more tax credits. Come hell of high water, Biden intends to force everyone to buy an EV.
EVs are coming. There is no escape. But the chargers, metals, rare earth elements and electrical grid all seem woefully short of what’s needed to make this worse. And on top of the increased electrical demand for EVs is a simultaneous push to depend more on wind and solar. The battery storage technology is nowhere near ready.
The UAW Demands a “Just Transition” to Electric Vehicles
Biden is hell bent on socializing the auto industry to his liking. And the socialists are pleased.
Everything Biden does adds inflation pressures.
Note that the Inflation Reduction Act Price Jumps From $385 Billion to Over $1 Trillion. That’s just a start.
And if you missed it, please see Hoot of the Day: The UAW Demands a “Just Transition” to Electric Vehicles
Critical Materials Risk Assessment by the US Department of Energy
Setting goals too high while simultaneously picking winners is a road to ruin. But that is the current inflationary path.
A Critical Materials Risk Assessment by the US Department of Energy suggests the same thing.
Expect a big bailout coupled with a grid failure. That’s the path we are on.
Meanwhile, please note Biden’s Solar Push Is Destroying the Desert and Releasing Stored Carbon
Herb Stein said that what can’t happen will not happen. Team Biden may be hell-bent on making us purchase EVs, but if the EVs and infrastructure are not there, we will face the choice between letting ICE vehicles continue a bit longer, or the ultimate fate of no vehicles for most of us.
You will live in a city and use public transportation and be happy.
And you will entirely depend upon the largesse of the Government.
Free market talking Elon Musk milked the govenment tit pretty effectively for Tesla. GM used to be Government Motors literally so what Ford is doing isn’t out of line with prior government – automakers relationships. (Going way back US gov gifted Chrysler with their questionable turbine, gas-guzzling, Abrams contract.)
Large foreign automakers are subsidized when their unionized employees receive national medical care. Here in the US they flock to non-union states and no national medical system. States fall over themselves throwing plant construction funds to these automakers. Government subsidies to automakers abound.
ICE drivers subsidize EV drivers, utility customers subsidize uneconomic solar and wind generation purchased by other utility customers. Oil & gas are burned in base power plants to charge these batteries and supply electricity to all customers.
Sort of sounds like you’re fine with people like me w/extremely meager retirements subsidizing retirements that are many times what I get. I’m not complaining, I invested and have other income … but it is really sad when the small retirement people are hit up a whole lot more so that the huge retirement people don’t lose any of their Cadillac retirement. If you don’t see the sad irony there … and how the unions purchase politicians to make it happen … you’re practicing a bit of cognitive dissonance.
China’s EV dominance? Hundreds of Thousands of EVs just being left to rot in fields… BYD cars with less than 31 miles on them. That’s a lot of toxic waste sitting there. 7 battery electric cars a day catch fire in China: the most involved brands. In the first quarter of 2022, 680 electric car fires were recorded. Lots of fly by night investment schemes. With DiCaprio ads. Bicycle sharing disappeared in 2018. Piles of bikes everywhere. Too bad we can’t post pictures.
Current-Gen Chevrolet Camaro Officially Discontinued After 2024
The elitists who want to run our lives, apparently want to end 75% of private vehicle ownership by 2050. In other transportation news, a second L.A. Metro bus driver has recently been stabbed while on duty. Metro is now considering the creation of its own police force, due to ridership safety issues. KTLA recently reported on safety problems on the expensive subway system, which opened a new section last week.
The US grid is a disaster. A hot mess of different agencies and woeful infrastructure. If you nationalize anything, its the grid not the automotive business. And what does FORD know about battery tech? Tesla already has the NV gigafactory. Toyota is moving away from Lith Ion
I won’t be buying an electric car.
I’ll wait until the Government buys me one.
Obviously they can afford to.
On another note –
I have quite a few jugs of water I would like the Government to mandate into Merlot and Shiraz.
I agree 100% … but I do believe you should add cabernet to the mix
The government can’t drive the road to fascism without owning automobile companies. The government already owns healthcare and education.
This is the beginning of the end of Ford.
I predict they will merge with GM within 5 years.
The merged company will not be able to use the name American Motors Corp (already used), but will end up a has-been like AMC.
There’s not a shortage of materials to build batteries. Supply has grown and they use fewer and fewer rare earths. The battery makers have been working to bring costs down and the best way to do this is to use cheaper materials. And they have.
EVs in the US in the first quarter accounted for 8.3% of vehicles sold. Will likely be over 10% by the 4th quarter. And the US is lagging pretty much the entire world in EV adoption.
And somehow, there isn’t an increase in blackouts from all the charging that’s taking place. Because many charge overnight when they’re asleep and electricity demand is low.
They should give the money to Tesla. It will be put to much better use. Ford will likely go bankrupt before they can pay it back. Tesla has revealed how incompetent legacy auto makers are. The best thing for Ford and GM is to have Tesla absorb them. Doubt Tesla would want them.
No mystery why it’s going to Ford and not Tesla. Ford is tied to the UAW who owns the progressive party … and you can’t give the unions the agreed upon kickbacks if the money goes to Tesla.
They should give the money to me and I will put it to its highest and best use.
Cross my heart, I promise.
“EVs are coming. There is no escape. But the chargers, metals, rare earth elements and electrical grid all seem woefully short of what’s needed to make this worse. And on top of the increased electrical demand for EVs is a simultaneous push to depend more on wind and solar. The battery storage technology is nowhere near ready.”
The exact same thing could have been made in 1900’s with regards to oil and gas. The argument would have been “but the drilling rigs, pipelines, refineries, compression plants, oil tankers and trucks are all woefully short of what’s needed to build a global hydrocarbon chain…” and yet here we are but with some major legacy oil & gas problems.
link to grist.org
How is the battery storage technology nowhere near ready?
Tesla’s 3.9 MW-hr mega pack battery weighs 42 tons. So say you need 1000 MW continuous to get through the 16 hour long winter night before you can begin recharging the batteries the next morning.
Do the math. 1000 times 16 divided by 3.9 times 42.
Then if you want you can divide by 100,000 tons per aircraft carrier to get aircraft carrier equivalents. 😊
That will help you grasp the scale of the problem.
Except this time we don’t have John D. Rockefeller to make it more and more efficient.
except nobody forced people to give up their horses and buggies if the area wasn’t ready to support the autos
I love Mish, he provides a very useful platform for economic discussion and debate. Unfortunately Mish, Wall Street and big politics were woefully behind the curve with regards to EVs. Thank god Tesla set up shop in the US and is bringing our reluctant population along on the EV ride into the future. The Lawrence- Livermore fusion break through and EV tech is the only countervailing forces that can save our hides.
BTW I just looked at the Mercedes EV offering and they are still10 years behind Tesla.
But Tesla will get no love from the government because they gov’t is kicking money back to unions and they can’t do that thru Tesla.
That is one of the craziest travesties of the EV conversion story. A ridiculous gauntlet. I’m just hoping that the best solutions can survive ignorant politics and people.
Fusion power is not coming in my lifetime or yours. There’s a multitude of difficult and expensive steps that need to be taken to make fusion workable, and we might never get there.
The Lawrence- Livermore fusion “break through” was not for people power.
The Lawrence- Livermore facility is for weapons research and always has been.
Since we are woefully incapable of consequential thinking, one must presume we will also have legacy problems with lithium, etc
This is yet another progressive kickback to the unions with climate change croutons on top. Just like when the taxpayers who had bicycle retirements got to bail out the UAW and their Mercedes retirements … just like when we propped up Solyndra, this is a thinly veiled kickback to the UAW and other unions. It’s like Robin Hood in reverse as we prop up absurd retirement benefits that only work if uninvolved 3rd parties are available to extort to make it happen. We taxpayers are those uninvolved 3rd parties.
I don’t blame Ford. How can anyone operate a car company when the Fed and states are constantly changing regulations. At some point you have to shred all your plans and kneel to the imperial palace and regional despots who don’t care about making profits or what consumers want.
Economists call this Industrial Policy. I call it bailouts:
– $7,500 taxpayer rebates are bailouts
– $9.2B Cheap Government loan is a bailout
Expect more and more bailouts as Ford spectacularly fails again and again.
Correct.
Everyone driving an ICE vehicle is being asked to subsidize EV’s. If EV’s are truly the future and are ready now then they should not need a 7500 subsidy.