OEMs pivot from US battery investments as EV incentives die out

Automotive OEMs are pausing plans and reducing battery investments in the US while the government removes EV incentives for customers and carmakers alike.

The US government has been removing incentives for EVs since president Donald Trump was inaugurated in January, and alongside sliding consumer demand, OEMs in America have been redefining their supply chains to lean more on ICE vehicles.

With the Senate and Congress having now passed the ‘One Big Beautiful Bill’ act, EV tax credits for consumers will be ended on 30 September, earlier than originally planned, which will further dissuade consumer uptake. This adds to an already cost-pressured market where OEMs have struggled to balance supply and demand for EVs.

Some of the largest automakers have halted plans for new battery plants in the US, with GM reducing their planned plants from four to three, and Ford putting one of its two planned plants on hold indefinitely. The former sold its stake in its plant in Lansing, Michigan to its JV partner LG Energy Solution at the end of last year, while the latter was planning on letting Nissan use part of its Kentucky battery plant instead, according to The Wall Street Journal.

Even outside the US in the North America region, EV investments have been slowing. Once ally of Trump, CEO of Tesla Elon Musk paused his plans to build a gigafactory in Mexico back in July until after the election. Since then, the factory plans have remained paused. Japanese firm AESC, which supplies batteries to BMW, also stopped construction on its $1.6 billion plant in South Carolina due to market uncertainty at the beginning of last month.

The row back of battery plants and investments could have an effect on supplier relations within the US. According to studies by Plante Moran, changing EV demand and pivots to or from electrification can greatly affect supplier trust. Dave Andrea, principal at Plante Moran, previously told Automotive Logistics: “That’s one area where there needs to be better communication. Even though there is still a lot of unused capacity, and underutilised capacity because of postponed or cancelled EV programmes, I think this comes back into the financial aspect of it of how the vehicle manufacturers are approaching handling sunk costs, and fairness and equitable sharing of risk and cost, because both the OEM and the supplier are in the same boat.”

Knock-on effects of US trade in Europe

At the same time, Europe’s EV forecast has been dropping, due in part to regulatory and market challenges. Evolving EU battery regulations require greater traceability, recycling efficiency and material localisation, making sourcing materials more difficult. And with China threatening exports of rare earth minerals globally (which are much needed in EV batteries), sourcing is getting more difficult.

As a result, more investments are popping up in the EU and the UK. In May this year, the UK announced a $1.4 billion funding deal for Japanese battery maker AESC’s gigafactory in Sunderland, north England, producing batteries for 100,000 EVs annually. The gigafactory will be located near Nissan’s plant, which announced two years ago that it would build two EV models at the factory.

The investment is being supported by the UK government, highlighting just how important government incentives and cash injections are to boosting the EV industry, in comparison to the US’ withdrawal of funding and incentives.