The US Energy Department announced on Thursday, June 22, that it will provide a loan of up to $9.2 billion to a joint venture between Ford Motor and SK, a South Korean battery maker. The purpose of this loan is to support the construction of three new battery manufacturing plants in Tennessee and Kentucky.
The loan — which is the largest government backing for a US automaker since the 2009 financial crisis bailouts — signifies a significant milestone in US President Joe Biden's ambitious industrial policy.
The primary objective of this policy is to empower American manufacturers to catch up with China in the realm of green technologies.
The loan has been granted to Ford for the purpose of constructing three battery factories, as the automaker gears up for a major expansion into electric vehicles (EVs).
These state-of-the-art factories, already being built in Kentucky and Tennessee, are part of a joint venture known as BlueOval SK. The venture is a collaboration between Ford Motor Co and SK On Co, a prominent South Korean battery manufacturer.
Ford's goal is to manufacture up to two million EVs by 2026, a substantial increase compared to the roughly 132,000 EVs produced by the company last year.
The construction of the three factories, along with an adjacent Ford EV assembly unit, is estimated to cost $11.4 billion.
In addition to the loan, Ford's electric vehicles, which will be equipped with domestically produced batteries, will be eligible for significant incentives embedded in the Inflation Reduction Act's $370-billion clean energy funding.
This funding was part of a historic climate measure that narrowly passed into a law approximately a year ago. The US government will subsidise battery manufacturing, and purchasers of these vehicles may qualify for additional tax rebates of up to $7,500 per vehicle.
A combination of generous incentives, government loans, and private sector investments has led to a surge in manufacturing activities following the implementation of the Inflation Reduction Act.
Currently, more than 100 battery and electric vehicle production projects are either announced or are already underway in the United States, representing a total investment of around $200 billion, as reported by Bloomberg.
With inputs from Bloomberg
