The future of the U.S. battery industry looked extremely promising several years ago. Consumer interest in electric vehicles (EVs) was rising, and the Inflation Reduction Act, passed in 2022, provided incentives for the domestic production of lithium-ion batteries that would power those vehicles.
Automakers responded with bold pledges to increase sales of EVs, pledges that were mirrored by major investment in gigafactories (enormous factories for producing lithium-ion batteries). More than 20 gigafactories were announced in the U.S. from 2021 through 2022, representing more than $50 billion in potential investment and thousands of new jobs. More announcements followed in 2023 and 2024.
Over the past year, though, it has become clear these ambitions will not be realized, and automakers and battery companies are reassessing the future. Many companies have made painful cutbacks. At the same time, those battery manufacturers in the right position are shifting toward new opportunities, some that do not rely on the EV market for success.
Expectations for U.S. EV demand reset
Until recently, almost all announced gigafactories in the U.S. were intended to produce batteries for EVs, tying their economic fortunes to automakers’ ability to sell a sufficiently large number of those vehicles.
U.S. sales of EVs rose rapidly from 2021 through 2023 and exceeded 1 million vehicles by 2023, making up 7.5 percent of total auto sales (Chart 1). Many new EVs carried lower price tags and traveled at greater range than their predecessors, increasing their attractiveness to consumers. Government subsidies helped support demand.
However, the pace of growth slowed substantially in 2024 and essentially plateaued in 2025. Despite efforts to introduce EVs of sufficient quality and low enough price to convince U.S. consumers to switch en masse from gasoline-powered cars, automakers couldn’t get more buyers to do so.
Recent federal policy changes have also affected sales. Consumer subsidies for purchasing EVs, originally scheduled to expire in 2032, were instead eliminated at the end of September 2025. Sales were unusually high preceding the expiration deadline and then dropped