As electric vehicle sales falter, major battery manufacturers are shifting focus to a booming market in large-scale energy storage systems, offering a potential buffer against losses in the automotive sector. This strategic pivot helps utilize underused factories and taps into rising demand from utilities and data centers, according to a recent analysis from the WSJ.

The Shift from EVs to Stationary Batteries

Battery companies that once prioritized electric vehicles now target utilities, renewable energy developers, and AI-driven data centers for their products. This change addresses overoptimistic EV forecasts from five years ago, which led to multibillion-dollar plants in the U.S. South and Midwest sitting underused or delayed. Energy storage systems, or ESS, have stepped in as an alternative, compensating for the EV slowdown.

Selling these stationary batteries was once overlooked. “ESS was the ugly duckling for a long time within our organization,” said Jaehong Park, an executive at LG’s battery arm. Yet, installations of energy-storage batteries in the U.S. more than tripled from 2021 to 2024, with projections showing 34% growth in 2025, per energy consulting firm Wood Mackenzie.

This growth stems from renewed U.S. electricity demand after 15 years of stagnation, driven by AI data centers, manufacturing, and broader electrification. Energy-storage systems manage extra grid demand and offset outages.

“If you have an outage of a massive data center or a giant gas plant, batteries can plug that hole,” said Stephanie Smith, chief operating officer of Eolian, a battery and renewable-energy company owned by BlackRock. “They can react in microseconds, and so you’re able to address so many different problems on the entire grid.”

Key Companies Leading the Transition

Tesla exemplifies this trend, generating billions from energy storage. Its storage segment revenue, including solar panels, grew 67% last year to $4 billion, offsetting a $6 billion drop in EV sales. Customers include utility providers like Intersect and Elon Musk’s xAI, which bought $191 million in Tesla Megapack products in 2024.

General Motors is exploring a deal to supply new and used batteries to recycling startup Redwood Materials for large storage systems. “Right now, there is a hunger for more energy from every source,” said Redwood founder J.B. Straubel.

LG’s battery unit, partnering with GM, Honda, and Hyundai on EV factories, diversified in late 2023 as EV markets softened. It repurposed a $1.4 billion expansion at its Holland, Michigan, plant—originally for EVs—into its first U.S. facility for stationary storage, using low-cost chemistry similar to Chinese competitors.

“We saw there is a rapid and urgently growing demand in the U.S. Here’s an opportunity for us to address it more quickly,” said Tristan Doherty, LG’s chief product officer for storage batteries. This move advanced LG’s entry into U.S. energy storage by a year.

Even a Chinese-owned manufacturer, once set to supply Mercedes-Benz, now eyes energy storage to revive a stalled Kentucky factory.

Battery Makers Pivot To Energy Storage As Ev Demand Slows

Challenges and Implications for EV Enthusiasts

China dominates this market, thanks to decades refining low-cost chemistry for stationary batteries, notes Sam Adham, a battery expert at market-research firm CRU. Despite U.S. tariffs under the Trump administration, Chinese options often remain cheapest.

U.S. firms counter by maximizing existing sites. LG expects U.S. EV demand to fall 10% this year and plans to cut capital spending by up to 30%. “Rather than building new capacity on new sites, we do want to try to maximize and fully utilize the existing sites that we have as much as possible,” said Chief Financial Officer Chang Sil Lee in January.

For EV owners, this pivot raises questions about battery supply chains. While it stabilizes manufacturers financially—LG’s sales shrank 24% last year amid EV pullback—it could delay EV-specific innovations. Building on that, domestic production offers reliability. Excelsior Energy Capital, buying from LG’s Michigan plant, values U.S.-made batteries for avoiding geopolitical risks.

“We can look our buyers of power straight in the eye and say, ‘This is a domestically sourced supply chain and we can commit to these timelines,’” said Anne Marie Denman, co-founder of Excelsior reportedly. “It isn’t subject to geopolitical winds.”

This transition underscores broader electrification trends, where batteries support not just vehicles but the grid powering them. EV enthusiasts might see long-term benefits as storage advancements improve charging infrastructure and energy reliability, even as short-term EV growth lags.

Photos courtesy of Tesla.