Ford Motor and its battery manufacturing partner will receive a $9.2 billion loan to build three battery factories in Kentucky and Tennessee, the Department of Energy said Thursday. The loan is the single biggest financial commitment the Biden administration has made in its effort to build an electric vehicle manufacturing network in the United States.
The loan will go to a joint venture created by Ford and its partner SK On called BlueOval SK, which will supply batteries for electric Ford and Lincoln cars and trucks. The factories, one in Tennessee and two in Kentucky, will employ 7,500 people and are among the largest such plants being built by auto and battery companies across the country, especially in Southern states. They are scheduled to begin production in 2025.
President Biden aims for half of new cars sold in the United States to be electric by the end of the decade, up from about 7 percent in the first three months of this year. By helping to finance battery factories, the administration hopes to ensure that the United States does not become dependent on China for batteries and their components. The administration also hopes the new plants will help make up for the loss of jobs in conventional auto manufacturing.
One of the factories will be in Stanton, Tenn., north of Memphis, adjacent to a large manufacturing complex that Ford is building to produce electric pickup trucks. The other two factories are in Glendale, Ky., south of Louisville, and will employ more people than Kentucky’s coal industry.
Ford is also spending $3.5 billion to construct a battery factory in Marshall, Mich., that will use technology from Contemporary Amperex Technology Ltd., a Chinese company known as CATL, which is the world’s largest battery maker. Ford’s deal with CATL, announced in February, drew political blowback from some Republican lawmakers who criticized Ford for working with a company that has close ties to the Chinese government.
Senator Joe Manchin III, a conservative Democrat from West Virginia, also criticized the agreement, which will allow Ford vehicles using CATL technology to qualify for federal tax credits.
BlueOval’s loan will come through the Energy Department’s Loan Programs Office, which has issued more than $35 billion in loans and loan guarantees for more than 30 projects in the last 14 years, according to the department. The office was created to provide loans to experimental and high-impact projects with flexible financing that private lenders will not provide.
“The goal is to help people choose the United States for their manufacturing facilities and do it more quickly than they otherwise would,” said Jigar Shah, director of the loan programs office. “We’re excited about it.”
BlueOval SK will pay the same interest as the federal government pays to borrow from investors, Mr. Shah said, a far better rate than would typically be available to a corporation. Ford and SK, which is based in South Korea, must also meet certain conditions to collect the money, mostly involving filing paperwork.
“This is a big step in having an automaker bringing the supply chain to the United States so we have more control over our future,” said Doug Lewin, president of Stoic Energy, a consulting firm.
Bloomberg News first reported details of the loan.
Since Mr. Biden was elected, the program has provided financing to nuclear power plants, solar and wind projects, and domestic manufacturing of electric vehicle batteries. The loan office was effectively moribund during the Trump administration.
From 2009 to 2011, when Barack Obama was president, the office made $16 billion in clean-energy loans, roughly 90 percent of which went to subsidize power plants. Beneficiaries included financial firms like Goldman Sachs and utilities like Exelon and NRG.
The office came under withering Republican criticism for backing Solyndra, a start-up that received a loan guarantee of more than $500 million in 2009 to develop cutting-edge solar technology but ceased operations in 2011.
Mr. Shah said his office had a far larger staff scrutinizing projects before loans were granted compared with 2009.
“We need to take risks,” he said. “That’s how we help America’s innovators and entrepreneurs build these first of a kind facilities — these major forward-looking projects for our national security — and get things done.”
For companies like Ford and SK, borrowing from the Energy Department is attractive because the agency offers better terms than private lenders and is more willing to take a chance on high-risk and high-cost projects.
“It is debt that if you fail, you don’t have to pay back,” said Michael Webber, a mechanical engineering professor at the University of Texas at Austin. “That is a huge advantage for capital intensive industries.”
Perhaps the loan program’s biggest success was a $465 million loan made to Tesla in 2010 when the electric car company was still struggling to prove itself. The money helped the company produce its Model S sedan at a factory in Fremont, Calif. Tesla repaid the loan early, in 2013, and has in recent years become the world’s most valuable automaker.
In December, the Energy Department lent $2.5 billion to a joint venture between General Motors and LG Energy Solution that will produce electric vehicle batteries at factories in Ohio, Tennessee and Michigan.
In February, the department announced a $2 billion loan to help Redwood Materials expand a manufacturing facility near Reno, Nev., to produce battery materials from new and recycled sources. Redwood is led by a former Tesla executive, J.B. Straubel.
