EV Slowdown Cuts Gigafactory Hopes in the US, as Battery Storage Rises

Dallas Fed points to EV slowdown in the US and a pivot to battery storage, with investments at stake and logistical challenges.

A recent analysis from the Dallas Fed shows that the outlook for the US battery industry has significantly shrunk.

Years ago, consumer interest in electric vehicles and incentives from the Inflation Reduction Act of 2022 created conditions for a domestic manufacturing boom. More than 20 gigafactories were announced between 2021 and 2022, with a potential investment exceeding US$ 50 billion and thousands of jobs.

New waves of announcements in 2023 and 2024 reinforced the vision of the US becoming a production hub. However, these ambitions have been adjusted by market reality: over the last 12 months, it has become clear that EV demand expectations did not materialize as expected, leading manufacturers and automakers to reassess strategies.

• More than 20 gigafactories announced between 2021 and 2022
• Potential investment exceeding US$ 50 billion
• US EVs surpassed 1 million vehicles in 2023, representing 7.5% of total auto sales
• Growth slowed in 2024 and stagnated in 2025
• Withdrawal of federal subsidies for EVs in September 2025 caused a drop in sales

Despite efforts to make production lines EV-centric, market response was not sufficient to sustain the pace. Today, EV sales rates do not justify the monumental investments, and forecasts revised by third parties and automakers indicate significant reductions, with billions of dollars already being reassessed in EV and battery assets.

However, a bright spot has emerged in the field of energy storage batteries for electrical grids. Demand for grid-focused storage has grown rapidly and is expected to remain strong in 2026, helping to integrate intermittent renewable sources like solar and wind, instead of relying solely on electric vehicles. Falling battery prices and the expansion of utility-scale solar installations are driving this adoption.

There is also growing interest in batteries for data center backup. Projects like Stargate 1 in Abilene could install battery capacity equivalent to about 6% of all US battery storage in 2025.

This transition, however, does not come without challenges. The storage sector frequently uses lithium iron phosphate cells, a type where domestic production has less experience and whose supply chain is heavily dependent on China.

The One Big Beautiful Bill Act of 2025 maintains tax credits for storage and domestic production facilities, but eligibility depends on restrictions on foreign involvement and content requirements, which may complicate short-term implementation.

In response to this scenario, several gigafactory projects have been canceled or paused, representing over US$ 10 billion in potential investments. Some manufacturers are adjusting production lines, moving toward lithium-phosphate batteries to match storage demand, even as EV-focused lines lose momentum.

What is your take on the future of the US battery industry: will storage become the sector's main driver, or will EVs still manage to regain momentum? Share your point of view in the comments below and join the discussion about the path of the country's battery chain.