US Automakers Shift Gears from Electric Vehicles to Energy Storage

The business of making cars is undergoing a significant transformation. Politics, current events, and the latest Wall Street fad, artificial intelligence, have automakers looking more like energy companies than ever before. This shift, analysts say, could provide a lifeline to US auto manufacturers struggling to make the transition to electric vehicles.

The key to their success lies in the same technology that was once supposed to power the majority of their lineups: batteries. Ford's announcement this week that it will spin off a subsidiary called Ford Energy has highlighted this trend. Ford Energy will focus on battery energy storage systems (BESS) and sell them to utilities, industrial customers, and data centers, with deliveries slated to begin in late 2027.

The company plans to repurpose unused production lines at a plant in Glendale, Kentucky, which was once meant to manufacture electric vehicle batteries. Investors responded positively to the news, sending Ford's stock price soaring 13 percent, its largest gain in a single day in years. This development marks a turn of fortune for Ford, which took a massive $19.5 billion write-down on its EV programs late last year.

The company scrapped some current and next-generation EVs in favor of a renewed emphasis on hybrids. By shifting towards battery storage, Ford is capitalizing on continued federal support for commercial battery storage projects. The Inflation Reduction Act, passed last year, provides tax credits for battery storage projects, incentivizing manufacturers to eventually transition to all-American batteries made of all-American materials.

Ford CEO Jim Farley has identified battery energy storage as one of the company's "high-margin opportunities," a welcome contrast to the notoriously thin profit margins in the carmaking business. Ford's four-year-old partnership with Chinese battery manufacturer CATL will likely play a crucial role in this venture. Other automakers have already begun to follow suit.

General Motors, for example, has partnered with battery recycler Redwood Materials to build batteries for energy storage and plans to work with LG Energy Solution to repurpose an EV battery plant in Tennessee. Stellantis has also collaborated with South Korean battery maker Samsung SDI to produce batteries in Kokomo, Indiana, which have already begun to be pivoted towards energy storage. While Stellantis is reportedly looking to exit this joint venture, the trend is clear: US automakers are betting big on battery technology and energy storage to drive growth.

Whether this strategy will ultimately succeed remains to be seen, but for now, it seems to be paying off. The question on everyone's mind is whether this pivot will help automakers overcome their EV struggles. Only time will tell, but one thing is certain: the auto industry is undergoing a significant transformation, and battery technology is at the forefront of this change.