Ford (F  ) announced Monday it will collaborate with Chinese supplier Contemporary Amperex Technology, or CATL, on a new $3.5 billion electric vehicle battery plant in Marshall, Michigan.

Under the partnership, Ford will own the factory entirely and license the battery technology from CATL, which supplies batteries to global automakers like Tesla (TSLA  ) and BMW (BMWYY  ). CATL has 13 factories across Europe and Asia, but does not manufacture in the United States.

The new plant, named BlueOval Battery Park Michigan, will make lithium iron phosphate (LFP) cells, which are both more cost-effective and longer-lasting than the company's current nickel cobalt manganese (NCM) batteries. The new batteries are expected to assist Ford in increasing EV production and profit margins as it works to compete with U.S. EV leader Tesla.

"Ford's electric vehicle lineup has generated huge demand. To get as many Ford EVs to customers as possible, we're the first automaker to commit to build both NCM and LFP batteries in the United States," said CEO Jim Farley in a statement. "We're delivering on our commitments as we scale LFP and NCM batteries and thousands, and soon millions, of customers will begin to reap the benefits of Ford EVs with cutting-edge, durable battery technologies that are growing more affordable over time."

The new plant is expected to open in 2026, with planned annual production forecasted to be 35 GWh per year, according to Ford, which is enough for 400,000 EVs annually. The deal follows Ford's recent partnership with Korean energy company SK Innovation to build three battery factories in Tennessee and Kentucky, with each plant designed to generate 43 GWh output per year.

The automaker said it plans to use LFP batteries in its Mustang Mach-E and F-150 Lighting, along with other electric vehicles. CATL will supply Ford with LFP cells until the Marshall plant begins production.

Ford was initially looking to expand its manufacturing footprint into Canada and Mexico, but choice to create another U.S. site following President Joe Biden's $430 billion Inflation Reduction Act. The act provided tax incentives to both consumers buying EVs and the companies that build battery factories domestically.