Ford, SK Innovation to Invest $11.4B in EVs

Giant automaker Ford Motor Company (F) and battery maker SK Innovation have partnered to build the largest state-of-the-art EV manufacturing campus, and twin battery plants, to produce the new generation F-Series trucks, and advanced lithium-ion batteries. The investment is expected to be worth $11.4 billion.

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Following the news, shares of the company jumped 4.5% in pre-market trade on Tuesday.

The $5.6-billion EV manufacturing plant called Blue Oval City will be built in Tennessee on a six square mile site. The mega campus will boast the latest technology, and most efficient auto production capabilities. (See Ford stock charts on TipRanks)

Additionally, the three new battery plants (two in Kentucky and one in Tennessee) named BlueOvalSK Battery Parks will collectively generate 129-gigawatt hours per year of U.S. production capacity for Ford.

Both the mega campus and twin battery plants are expected to start production in 2025 and are said to create nearly 6,000 job opportunities in Stanton, Tennessee, along with 5,000 new jobs in Glendale, Kentucky.

The Blue Oval City will host a vertically integrated ecosystem for Ford with vehicle assembly, the BlueOvalSK battery plant, key suppliers, and recycling. Once the new assembly plant becomes fully operational, it is expected to be carbon neutral with zero waste to landfill.

Ford and SK Innovation will form a joint venture, BlueOvalSK, subject to certain regulatory and other approvals and will make investments in the plants via the JV.

Jim Farley, Ford president and CEO, said, “This is our moment – our biggest investment ever – to help build a better future for America.”

Ford will be investing approximately $7 billion in the JV, which is one of the biggest to date for any single auto manufacturer in the U.S. Ford expects to invest about $30 billion in EVs by 2025, and expects around 40%-50% of its global vehicle volume to be all-electric by 2030.

Ford is also investing $90 million in Texas as part of its total $525-million investment across the U.S. over the next five years to train skilled technicians, and support Ford’s growing portfolio of connected EVs.

Recently, Wells Fargo analyst Colin Langan maintained a Buy rating on the stock, but reduced his price target to $17 (18.3% upside potential) from $18.

The analyst noted that the growing semiconductor shortage is a primary factor in the decline of auto values as investors lost patience waiting for markets to rebound. Having said that, Langan stated that Ford stands to benefit the most from the likely recovery in 2022-23, especially with its restructuring actions and new product offerings.

Langan added, “Most auto demand indicators remain positive, and therefore we are optimistic in the long-term recovery once semiconductor supply improves. We expect value to outperform (again) once companies update their outlook for lower production & investors have line of sight to a multi-year auto-recovery.”

Overall, the stock has a Moderate Buy consensus rating based on five Buys and three Holds. The average Ford price target of $16.16 implies 12.5% upside potential to current levels. Shares have gained 111.7% over the past year.