Manufacturers are changing their focus from electric vehicle (EV) batteries to energy storage cells, aiming to benefit from the growing demand in this area, as EV sales decline.
Ten factories in North America are being repurposed to create batteries more suited for energy storage systems. These adjustments come after cell manufacturers decided to cut enough capacity that could have powered two million EVs, according to market research firm CRU. Out of the ten plants, seven will mainly cater to the energy storage market.
Energy storage systems utilize battery modules organized in racks, managed by specialized software. These systems are crucial for national electricity grids, homes, businesses, and factories, helping to manage variable energy from wind and solar sources.
Among the plants changing their production methods is a Kentucky factory initially set up for EV batteries. Ford is modifying this site due to increased demand for domestic energy storage solutions, especially with fewer qualified suppliers available.
General Motors’ battery leader, Kurt Kelty, mentioned that the company is also contemplating producing its energy storage batteries. Additionally, Stellantis, in partnership with Samsung SDI, is converting its Indiana facility to make energy storage cells, positioning themselves to cater to major tech firms rapidly developing AI data centers.
AI data centers require constant power to mitigate the risks of outages or voltage fluctuations. As the demand for these centers grows, it presents new revenue opportunities for EV and battery companies.
Tesla, which uses batteries from various suppliers in its Megapack and Powerwall systems, reported a 27% increase in energy storage revenue compared to the previous year, even as its EV sales dipped by 9%.
The shift towards energy storage systems has been accelerated by decreasing government support for EVs, notably after the previous administration reduced tax credits and sought to relax emissions standards designed to motivate EV adoption.
Analysts at BloombergNEF have lowered their outlook for EVs’ share of total car sales in 2030 from 48% to just 27%. Currently, EVs comprise about 8% of new car sales in the U.S.
Stellantis has also initiated the sale of its 49% stake in a Windsor, Ontario plant to Korean battery giant LG for just $100, following a substantial writedown linked to its aggressive EV expansion strategies.
Despite some production credits being maintained for battery manufacturers, uncertainties in policy and increasing competition may pressure the market. For instance, the U.S. has imposed a significant tariffs on Chinese energy storage batteries, which helps domestic producers compete effectively.
While demand for energy storage is likely to increase amidst the rise of data centers, there are concerns about whether this demand can fully absorb the added capacity from repurposed EV battery lines and continued imports from China.
Prospects also exist that companies transitioning to energy storage might miss opportunities in the expanding EV market, as the latter continues to attract more investment and attention.
In summary, the evolving landscape of energy storage versus EV production highlights the ongoing challenges and opportunities manufacturers face in a fluctuating market.