Nissan's Plan To Avoid Tariffs? Take Over a Ford Plant
Though not fully implemented, the specter of tariffs looms large over the auto industry. After decades of building global supply chains and leaning into overseas manufacturing, automakers are growing concerned that tariffs will hit hard and fast. Like many, Nissan is looking to stateside production and procurement to avoid tariffs (should they arrive) and is now partnering with Ford to help in one critical way.
The Wall Street Journal reports that a Ford plant in Kentucky will now be used by Nissan to manufacture batteries for its EVs. Though the report doesn't detail Nissan's production plans, expect that batteries for the Ariya and Leaf, Nissan's only two fully electric vehicles, will come from this Kentucky plant.
In 2021, Ford built two factories in Kentucky as part of a larger $7 billion investment in production and electrification. The two plants were a joint venture with SK On, a battery maker in Korea that produces EV batteries and power storage solutions. The Wall Street Journal notes that weaker-than-expected demand for EVs caused one of the Kentucky facilities to sit dormant. That low demand eventually met with high production costs and looming tariffs, creating a slowdown in Ford's battery manufacturing. Nissan's choice to utilize this defunct factory helps it avoid tariffs on imported EV batteries, which promise to be a substantial additional cost to EV buyers that they are unlikely to tolerate.
In Q1, Nissan reported a $4.5 billion loss and canceled a planned battery factory in Japan. SK On and Nissan already have a deal in place, too; in March, Nissan said SK On would provide batteries for electrified SUVs in production at its Canton, Mississippi, plant. It seems reasonable that this defunct Ford plant in Kentucky-that was built in partnership with SK On-will serve as the production point for SK On and Nissan's efforts.
Details of the deal between SK On and Ford are unknown, but this development is significant for Ford. It either recoups losses by leasing the factory to Nissan or avoids any potential breach of contract with SK On as the factory sits dormant. If SK On owns and operates the factory, but Ford can't satisfy a production agreement, Nissan stepping in may ease Ford's accountability.
Nissan continuously struggles to gain footing in the U.S. market despite making respectable SUVs and a great EV SUV. If this deal with SK On keeps Ariyas (and Leafs, maybe?) on its lots, EV buyers may give its vehicles a closer look. Many other automakers, like BMW, are in a holding pattern with electrified vehicles, so the time might be right for Nissan to gain market share.
It's a tenuous time for Nissan. A spiked deal with Honda had many wondering if the brand would survive, and as EV demand wanes and tariffs loom on the horizon, Nissan must thread the needle on electrification to gain market share. Partnering with SK On to produce EV batteries domestically is smart, but whether it results in more sales remains to be seen.
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