Battery companies in the United States are slowing construction or reevaluating significant investments due to tariffs on China and proposed changes to tax credits. The rise of battery manufacturing in the U.S. had previously been supported by generous incentives from Congress and the Biden administration.
However, this growth is now facing challenges as restrictions on Chinese market access are being pursued by the Trump administration and Republican lawmakers. Companies across various states, including South Carolina and Washington, are reassessing factory projects for rechargeable batteries and their components.
Higher trade barriers are disrupting supplier-customer relationships between the U.S. and China, while Republican efforts to block battery manufacturers with Chinese ties from accessing federal tax credits are adding to industry concerns. The electric vehicle market is also softening, further complicating the landscape for battery manufacturers.
Provisions in the Trump administration's domestic policy bill would create operational challenges for many companies, as China is a dominant player in battery manufacturing and provides essential components. This situation presents a dilemma: the U.S. aims to cultivate a domestic battery industry while many lawmakers seek to minimize reliance on China, despite the latter's significant industry lead.
Experts suggest that the U.S. will need to depend on foreign components and expertise to build its own supply chains, similar to China's strategy in the auto sector. A notable project at risk is Ford Motor's $3 billion battery factory in Marshall, Michigan, which is set to produce battery cells for electric vehicles. Ford's use of technology licensed from a Chinese company would render it ineligible for federal subsidies under the proposed legislation.
William Clay Ford Jr., executive chair of Ford, expressed concerns that losing tax credits could jeopardize the Marshall project, emphasizing the unfairness of changing policies after significant investments have been made.
Some companies have already begun pulling back on projects. AESC recently paused construction on a $1.6 billion electric vehicle battery plant in South Carolina due to policy and market uncertainties. The plant's batteries, intended for BMW's electric vehicles, would also become ineligible for federal subsidies due to Chinese ownership stakes.
Additionally, Group14 Technologies has delayed construction of its battery materials factory in Moses Lake, Washington, as customers in China reacted to increased tariffs. The company is now focusing on production in South Korea, with plans to begin operations in Moses Lake early next year instead of this summer.
The Trump administration has indicated a desire for more domestic manufacturing and increased mining of critical minerals. However, criticism of electric vehicles and renewable energy sources continues to pose challenges for battery demand.
Despite these hurdles, the energy department has emphasized investment in projects that promise returns for Americans while aiming to secure supply chains for critical energy infrastructure.
Domestic battery manufacturers are also grappling with lower-than-expected electric vehicle popularity in the U.S. This has led to delays, cancellations, and scaling back of projects even before recent tariff increases and tax credit eliminations were proposed. Over $6 billion in planned U.S. battery factories were canceled in the first quarter of the year, according to a research firm tracking investments.
The Republican policy bill could further diminish demand for electric vehicles by eliminating a $7,500 tax credit for buyers, potentially rendering planned battery plants unnecessary and threatening existing capacities.
Jennifer Granholm, the U.S. energy secretary, warned that removing clean-energy incentives would cost jobs and increase dependency on China. She emphasized the importance of making the U.S. attractive for investment to support an effective industrial strategy.
Some experts argue that the U.S. should embrace foreign investment, including from China, to foster competition and innovation in the battery sector. They caution that restricting the market could hinder long-term sustainability.
Group14 Technologies remains hopeful about ramping up production at its Washington plant if tariff uncertainties are resolved and demand increases. AESC plans to resume construction in South Carolina once market conditions stabilize, having already invested over $1 billion in the site. Meanwhile, BMW is on track to start electric vehicle production nearby by late 2026, although details regarding battery sources remain undisclosed.