Battery makers in slumping EV business find lifeline elsewhere

Big U.S. EV battery makers are stepping back from the market that got them started and betting on a new set of customers in an entirely different business.

- Christopher Otts

Instead of carmakers, these companies have started making batteries for utilities, wind and solar-power developers, and massive data centers that train artificial intelligence.

Selling large, stationary batteries for "energy storage systems," or ESS, used to be a niche market that wasn't worth much attention, said Jaehong Park, an executive at the battery arm of South Korean conglomerate LG.

"ESS was the ugly duckling for a long time within our organization," Park said.

Five years ago, automakers and battery companies raced to build multibillion-dollar electric-vehicle battery plants across the U.S. South and Midwest, based on EV forecasts that proved too optimistic.

Now, many of these plants are underused, delayed or stuck in limbo. Energy storage has emerged as an alternative, helping to compensate for the slowdown in electric vehicles.

Tesla generates billions of sales from batteries for energy storage. Revenue from the storage segment, which also includes solar panels, grew 67% last year to $4 billion, partially offsetting a $6 billion fall in revenue from EV sales.

Some of Tesla's biggest customers for its Megapack battery systems are utility-scale energy providers such as Intersect, as well as Tesla chief Elon Musk's separate artificial-intelligence company, xAI. xAI purchased $191 million of Tesla Megapack products in 2024, according to financial disclosures. Tesla didn't respond to a request for comment.

On Wednesday, General Motors said it is exploring an arrangement to supply energy-storage batteries to Redwood Materials, a startup company focused on battery recycling.