Summary of Key Points
A few years ago, American automakers (General Motors, Ford, Stellantis) saw the explosive growth of electric vehicles and, driven by subsidies from the U.S. Inflation Reduction Act (IRA), partnered with Asian battery companies (LG, Samsung, SK On, etc.) to establish battery manufacturing plants, creating what was known as the "Battery Belt" in North America. However, electric vehicle sales did not meet expectations (only accounting for 6% of light vehicle sales in the first half of 2026), and hybrid vehicles became more popular, leading to an oversupply of battery capacity. To avoid continued investment risks, automakers have begun to sell their stakes in these joint ventures, passing on the "hot potato" to the battery companies while retaining technical cooperation and purchasing rights—shifting from a strategy of "owning capacity to ensure supply" to one of "flexible procurement to reduce risk."
I. Why the Rush to Build Battery Plants a Few Years Ago?
Between 2021 and 2022, American automakers were eager to build battery plants for several main reasons:
1. Fear of Supply Chain Vulnerability: Batteries are a critical component of electric vehicles, accounting for 30%-40% of the cost, and global battery technology was primarily in the hands of Chinese, Korean, and Japanese companies. If they relied on external suppliers for batteries, they could face production disruptions if electric vehicle sales surged.
2. IRA Subsidies: The U.S. government offered substantial incentives for domestic battery production, with subsidies of up to $35 per kilowatt-hour for battery cells and $10 per kilowatt-hour for battery modules. For example, a 70-kWh battery could receive a manufacturing subsidy of $3,150, essentially allowing the factories to profit without much effort.
3. Bet on Electric Vehicle Growth: The industry predicted a surge in electric vehicle sales in the U.S., and automakers planned for millions of units by 2030, investing heavily in joint ventures (such as Ford and SK On's $11.4 billion investment in three plants, and General Motors and LG's three plants), forming the Battery Belt from Michigan to Georgia.
II. Unmet Demand and the Turn of Events
Good times did not last long, and reality hit the automakers hard:
1. Slow Sales of Electric Vehicles: In the first half of 2026, the market share of electric vehicles dropped from 7% to 6%, while hybrid vehicles increased to 16%. The reasons were clear: electric vehicles were expensive, required inconvenient charging, and had reduced range in winter. After the subsidies expired, consumers preferred hybrids, which did not require charging and were priced similarly to gasoline vehicles.
2. Severe Overcapacity: The planned battery capacity nearly doubled the expected demand by 2035. A 30-GWh plant could produce hundreds of thousands of electric vehicles, but with insufficient orders, factories were operating at half capacity, increasing costs per battery.
3. Dual Pressures on Automakers: Electric vehicle businesses were not profitable, and they still had to fund underutilized battery plants (with fixed costs for facilities, equipment, and labor). For instance, Ford allocated $19.5 billion in 2025, including costs for reorganizing its battery plants.
III. Automakers Shedding Their Burden: Selling Stakeholders and Dissolving Joint Ventures
Automakers began to reduce their involvement in battery manufacturing without completely withdrawing:
- General Motors: Sold its Lansing plant to LG and its New Carlisle plant to Samsung, retaining only two joint plants in Ohio and Tennessee for supply.
- Ford: Split its joint venture with SK On: Keeping the Kentucky plant (renovated for energy storage) and the Tennessee plant (transferred to SK On); also retaining a wholly-owned plant using CATL technology for lithium-ion battery production.
- Stellantis: Retained its joint plant in Indiana for its own models and sold its Canadian plant to LG.
Commonality: Automakers no longer took full responsibility for the utilization of the plants, shifting subsequent investment and customer acquisition risks to the battery companies, while only retaining purchasing rights and technical cooperation.
IV. How Battery Companies Turn Overcapacity into Profitability
Battery companies were willing to take over the plants because they saw additional opportunities:
1. Finding New Customers: For example, LG immediately supplied batteries for Toyota's electric Highlander and Tesla after acquiring General Motors' Lansing plant.
2. Switching to Energy Storage: Samsung planned to add energy storage production lines after taking over the New Carlisle plant; Ford's Kentucky plant was also converted for energy storage. The demand for energy storage (in data centers and grid regulation) is growing rapidly, accounting for one-third of U.S. battery installations by 2025.
3. Leveraging Subsidies: As long as the plants produced domestically, they could qualify for IRA subsidies, whether for power batteries or energy storage. This allowed battery companies to maintain operations even with limited electric vehicle orders.
However, challenges existed: some plants were designed for high-nickel ternary batteries, while energy storage requires lower-cost lithium-ion batteries, necessitating costly renovations; moreover, the energy storage market might not absorb all the excess capacity.
V. The Shift from "Gambling on the Future" to "Living in the Present"
A few years ago, automakers aimed to "own capacity to ensure supply." Now, their approach is "just need to purchase batteries without bearing the risks." The change reflects a shift from:
- Fixing costs (plant investments) to variable costs (battery purchases) to avoid future forecasting errors.
- Sharing sales risks with battery companies to focusing on flexible procurement based on actual demand.
This shift reflects a reality where electric vehicle sales did not meet expectations, leading automakers to adjust their strategies more pragmatically.
In summary: The transition from American automakers' pursuit of battery capacity to their current effort to shed related burdens reflects the underperformance of electric vehicle sales and a re-evaluation of business risks. Although the owners of the battery plants have changed, the supply relationship remains, with risks being transferred to more specialized battery companies.