Ford’s (F) announcement Monday to more closely align its vehicle lineup to consumer demand and subsequent $19.5B impairment charge eclipsed the company’s other major strategic announcement – to enter the energy storage market with a $2B investment to produce energy storage systems for data centers and infrastructure demand.
The investment will convert Ford’s (F) Glendale, Kentucky site to make 5 MWh+ battery energy storage systems (BESS) and related components, while the facility in Marshall, Michigan (idled since September 2023 due to limited EV demand and union negotiations) will make smaller amp-hour cells for residential energy storage system (ESS) along with lithium iron phosphate prismatic cells that will be used in Ford’s (F) upcoming Universal Electric Vehicle platform.
While the shift is not without risks, Morgan Stanley’s Andrew Percoco sees “opportunities for Ford to leverage its manufacturing footprint and technology in a rapidly growing energy-storage market.”
According to Morgan Stanley’s Global Utilities analysts, total stationary energy-storage deployment for batteries is expected to grow at a 15% compounded annual growth rate to ~600 GWh annually by 2030.
Assuming a 2-4 GWh storage attachment to each data center globally, “this would add ~500-1,000 GWh of additional upside potential to global ESS market through 2030,” Percoco calculates.
Therefore, if Ford ramps to 20 GWh of run-rate ESS production, it would imply $4B to $5B of incremental revenue, Percoco says. By comparison, Tesla (TSLA) currently generates 30% gross margin and 20% EBIT margin within its ESS business thanks to its scale and vertical integration, while smaller ESS players can still generate low-double-digit- gross margins and low-single-digit EBIT margins.