Why America’s experiment to make the batteries of the future could soon fail

Over the past three years, companies have invested tens of billions of dollars toward making electric vehicles in the United States, buoyed by tax incentives aimed at helping American businesses compete with China.

Now, those companies are facing a strange problem: too much manufacturing capacity, not enough demand.

As sales of electric vehicles slow and congressional Republicans take aim at EV tax credits and incentives, the United States is slated to have more battery and EV manufacturing than it needs, according to a report released Wednesday by the Rhodium Group, a research firm. That could leave factories — many of which are already operating or under construction — stranded if car sales continue to slump.

“The rug is being pulled out from under these manufacturers,” said Hannah Pitt, director in Rhodium’s energy and climate practice.

The Inflation Reduction Act, signed into law by President Joe Biden in 2022, included several provisions to push automakers to produce electric vehicles and electric car parts in the United States. One tax credit gives companies cash for producing battery components domestically; the consumer EV tax credit, meanwhile, offers $7,500 to customers for an EV that is assembled in the United States with domestic battery parts and minerals.

After the law passed, battery investment in the U.S. skyrocketed. Companies went from investing about $1 billion per quarter in 2022 to $11 billion per quarter in 2024. Most of that battery investment went to red states, including in the South’s “Battery Belt,” where manufacturers were drawn to inexpensive land and a nonunionized workforce.

Now, however, that battery boom is teetering. In the first three months of 2025, companies canceled $6 billion in battery manufacturing — a record. EV sales have slowed.

Meanwhile, Republicans are planning to phase out the tax credit for producing battery components and eliminate the consumer tax credit for EVs. In a plan released by the Senate Finance Committee on Monday, Republicans suggested slashing almost all the clean energy provisions from the Inflation Reduction Act. The House has already passed a bill that would repeal most of the provisions.

“Hundreds of thousands of manufacturing jobs in the U. S. are now in danger,” Sen. Ron Wyden of Oregon, the panel’s top Democrat, said at a news conference Tuesday. “My own view is that projects all over the country are being canceled as we speak.”

Albert Gore, executive director of the Zero Emission Transportation Association, an EV lobby group, said, “Legislators should not be surprised if passing the bill as written, they have created the conditions for closure of a facility in their district.”

According to the new report, the United States has almost enough battery capacity announced or under development to meet demand all the way to 2030 if EV sales continue to slump. That might sound like a good thing — but if EV sales drop further, it means that companies will be left with factories they won’t be able to use.

At the same time, China has excess battery capacity. The country has enough manufacturing to meet the entire world’s demand for batteries — and may be looking to off-load them onto other markets.

“A lot of the big companies in China are looking to overseas markets because they have better margins there,” said Evelina Stoikou, head of battery technologies and supply chains at the clean energy research firm BloombergNEF. “They’re not producing just to meet demand internally.”

And if the incentives for using U.S.-made batteries disappear, the nation’s manufacturers would be left high and dry.

“In the absence of those policies, there’s no reason that if I’m X vehicle manufacturer, I would go source an American battery,” said Ben King, associate director with energy and climate at Rhodium. “It’s just objectively quite a bit more expensive than a Chinese counterpart.”

That means that the U.S. battery manufacturing renaissance could start to look like a blip — a brief, three-year push of investments pulled down by radical policy changes. And even in a new administration, it might not resurge.

“It’s like every three or four years, there’s a roll of the dice,” King said. “It would shake the confidence of any company or investor looking to do this again.”

• Jake Spring contributed to this report.