The U.S. Energy Department has just finalized a massive $9.63 billion loan to a joint venture between Ford Motor Company and SK On, a South Korean battery maker, to build three state-of-the-art battery manufacturing plants in Tennessee and Kentucky. This loan is a game-changer for the future of electric vehicle (EV) production in the U.S. and marks a significant step in the country’s push to lead in clean energy and electric vehicle manufacturing.
Here’s everything you need to know about this record-breaking loan and its impact on the EV industry.
A Record-Breaking Loan for EV Battery Production
The $9.63 billion loan is part of the Advanced Technology Vehicles Manufacturing (ATVM) loan program, which aims to support the growth of electric vehicle production and other clean energy technologies in the U.S. This is the largest loan ever granted through this program, and it highlights the Biden administration’s commitment to boosting American manufacturing, especially in the electric vehicle sector.
This loan will specifically go to BlueOval SK, a joint venture between Ford and SK On (the battery unit of South Korea’s SK Innovation). The joint venture plans to build three new, 4-million-square-foot battery plants — two in Kentucky and one in Tennessee. These plants will help produce enough battery capacity to power more than 120 gigawatt hours of electric vehicles annually.
Why This Loan Matters: Shaping the Future of EVs in the U.S.
This loan is a crucial part of the U.S.’s effort to shift away from fossil fuels and towards clean, renewable energy sources, particularly in the transportation sector. With electric vehicles becoming an increasingly essential part of the global push to reduce carbon emissions, the U.S. government is putting its weight behind domestic EV production to make sure the country stays competitive in the global market.
“When you look at the competition that we have from China, it is very clear to me that they have used low-cost debt for a very long time to promote a lot of manufacturing capacity,” said Jigar Shah, head of the DOE Loan Programs Office. “This program is essential to getting people to choose the United States of America for manufacturing.” The loan gives American companies an edge in the battle against countries like China, which have already built massive EV production capacities using government-backed loans and incentives.
BlueOval SK’s Huge Investment: $11 Billion and Counting
The BlueOval SK joint venture has already invested over $11 billion in its three new battery plants. The first plant in Kentucky is expected to start production in 2025, and the Tennessee plant will begin its production towards the end of 2025. These plants are expected to create thousands of jobs and help fuel the U.S. electric vehicle revolution.
Ford and SK On are making a major bet on the future of electric vehicles in the U.S., and this loan provides a significant boost to their plans. The combined battery output from these plants will help Ford meet its ambitious goal of producing millions of electric vehicles in the coming years, while also reducing its dependence on foreign-made batteries.
Why Did It Take 18 Months to Finalize the Loan?
You might be wondering why it took nearly 18 months for the loan to be finalized. According to BlueOval SK, the U.S. Energy Department conducted thorough due diligence before awarding the loan. This process included comprehensive reviews of the project’s technical and financial aspects, as well as legal and regulatory compliance. Such a detailed review ensures that the loan is awarded to projects that are both economically viable and technologically sound.
More Government Support for EV Battery Production
This loan to BlueOval SK is just one of many moves by the Biden administration to support the U.S. electric vehicle industry. Earlier this year, the Energy Department also announced it is planning to loan up to $7.54 billion to the StarPlus Energy joint venture, which is backed by Chrysler-parent Stellantis and Samsung SDI. This loan will help build two lithium-ion battery plants in Indiana.
In addition, the DOE is also considering a loan of up to $6.6 billion for Rivian, an electric vehicle startup, to help it build a new plant in Georgia for producing smaller, more affordable EVs.
These moves are part of a larger push to ramp up battery production and make the U.S. a global leader in the electric vehicle industry.
The Bigger Picture: Biden’s EV Strategy vs. Trump’s Criticism
The loan to BlueOval SK and other similar projects are part of the Biden administration’s broader strategy to accelerate the production of electric vehicles and batteries within the U.S. This strategy is aimed at reducing America’s dependence on foreign manufacturers, especially in the critical EV battery market.
However, these efforts have faced criticism from some political circles, particularly from Trump’s supporters. Critics argue that the Biden administration is giving too many incentives to companies to produce electric vehicles and could be over-relying on government-backed loans. Some have also criticized the government’s role in shaping the economy in such a heavily subsidized way.
Despite the criticism, the Biden administration is doubling down on its strategy, and the government-backed loan to BlueOval SK signals that the U.S. is serious about becoming a global powerhouse in electric vehicles and battery manufacturing.
The Road Ahead for Ford, SK On, and the EV Industry
Looking forward, the BlueOval SK joint venture’s plans to build three large-scale battery plants in the U.S. will play a pivotal role in the electric vehicle revolution. Ford, SK On, and the U.S. government are all investing heavily in the future of clean energy transportation, and this loan is a crucial step toward making the U.S. a dominant player in the global electric vehicle market.
By the end of 2025, Ford and SK On’s Kentucky and Tennessee battery plants will begin cranking out batteries at full capacity, contributing to the production of millions of electric vehicles across the U.S. This initiative will not only help reduce carbon emissions but also create thousands of high-quality jobs, further boosting the U.S. economy.
The BlueOval SK joint venture represents the future of the automotive industry in the U.S., and with the support of the Biden administration and the Energy Department’s loan program, it looks poised to succeed in bringing cleaner, more affordable electric vehicles to the American market.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.