American carmaker Ford Motor Company (NYSE:F) is hurled with yet another challenge amid the ongoing strike with the United Auto Workers (UAW) union. This time, Ford has halted construction at its electric vehicle (EV) battery manufacturing plant in Michigan owing to political concerns. The $3.5 billion plant was poised to make lower-cost EV batteries with the help of Chinese battery maker Contemporary Amperex Technology Co. (CATL).
Why Ford is Stopping Construction of Michigan Plant
The main point of debate is the EV tax credit of $7,500, which is to be given to EV drivers under the Inflation Reduction Act (IRA). CATL is considered the largest battery manufacturer globally, and the Biden Administration is worried about having a Chinese battery maker dominate the U.S. auto market. However, a few White House officials support the construction of this plant since it may lead to the creation of 2,500 new jobs.
The battery plant in Dearborn, Michigan, would have enabled Ford to reach its ambitious target of manufacturing 2 million EVs globally by 2026. Even so, softening and unpredictable EV demand has forced the legacy car maker to pull back on its ambitions. Ford planned to use these batteries in its Mustang Mach-E electric SUV and F-150 Lightning EV pickups.
Ford’s China Troubles Are Brewing
In other news related to Ford’s China connections, the carmaker has dropped its direct sales business in China. The automaker will instead continue to sell EVs through dealers. Ford tried to copy EV maker Tesla’s (NASDAQ:TSLA) strategy of directly selling EVs in China as a means to boost sales. However, for Ford, the strategy failed to propel sales of its Mustang Mach E, which it thought would be an apt competition for Tesla’s Model Y series in China.
Running direct-to-sales channels is a costly proposition, and Ford’s unit sales are not supporting the strategy. Ford’s Mach E sales have averaged a few hundred per month this year. Ford’s market share in the world’s largest EV market was barely 2% in 2022. Some people blame Ford’s hesitance to have a local Chinese name for its EVs in China as a reason for the declining sales, among other factors. Despite the challenges, Ford is focused on continuing its ambitions in China while pivoting towards other EV models.
What is the Target Price for F Stock?
On TipRanks, the average Ford price target of $15.53 implies 23.4% upside potential from current levels. Also, Ford stock has a Moderate Buy consensus rating based on seven Buys, eight Holds, and one Sell rating. Meanwhile, F stock has gained 17.2% so far this year.
Wall Street remains cautiously optimistic about Ford’s stock trajectory, mainly owing to the ongoing labor issues. Out of the Big Three automakers, Ford is the only one having positive negotiations with the United Auto Workers (UAW) union for the new four-year labor contract.