Ford Motor said Tuesday that it was resuming work on an electric vehicle battery plant in Michigan but was significantly scaling back its plans in part because of the slow adoption of electric vehicles in the United States.
A company spokesperson said Ford now expected the plant in Marshall, Michigan, to create 1,700 jobs instead of 2,500, but still expected production to begin in 2026.
Demand for electric vehicles “is not growing at the rate we originally expected,” Ford spokesman TR Reid said. In the most recent quarter, major auto companies like Ford reported that sales of electric vehicles had increased, but not at a sufficient pace to keep up with the Biden administration’s ambitious goals.
The plant was initially planned to produce 35 gigawatt-hours of batteries per year, which Ford estimated was enough to equip about 400,000 vehicles. Now, the plant will produce 20 gigawatt hours a year, enough for about 230,000 vehicles, or a 42.8 percent cut.
Ford did not specify exactly how much money it would withdraw from the project, but said it would be roughly equivalent to its production reduction. If the 42.8 percent cut in production were applied to its investment, it would represent a reduction of $1.5 billion from the initially announced investment of $3.5 billion.
Ford said in September that it would suspend construction due to concerns that it would not be able to make products at a competitive price. At the time, the company was in the midst of contentious negotiations with the United Automobile Workers union.
Rising labor costs were also a factor in Ford’s decision to scale back its plans for the factory, Reid said. Ford’s contractual agreement with the UAW, which has been ratified by union members, increases the maximum wage for production workers by 25 percent.
The agreement will allow UAW members to be transferred to battery and electric vehicle plants under construction, such as the one in Marshall. If workers decide to unionize, they will be protected by the UAW contract.
The UAW hopes to keep membership rates high amid the transition to electric vehicles, but automakers have opposed it, arguing it puts them at a disadvantage compared to their non-union competitors.
The UAW did not immediately respond to a request for comment Tuesday.
Ford has also faced criticism from conservative lawmakers over its plan to license technology to CATL, a Chinese battery maker. Currently, lithium iron phosphate, or LFP, batteries are not produced in the United States. Some American electric car makers, such as Tesla, import LFP batteries from China.
It is unclear whether U.S. companies that license technology from other countries will qualify for government incentives to promote the shift away from fossil fuels. Reid said Ford was “confident in the technology licensing agreement for this plant.”