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.

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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 precipitously (Chart 2).

Current sales of EVs are insufficient to justify the investments made in gigafactories, and the outlook does not suggest significant improvement anytime soon. Many third-party forecasters have markedly cut their demand projections for EVs in the U.S. Automakers have also acknowledged these difficulties, both by reframing their EV sales goals and by making the difficult decision to write off billions of dollars of capital investments tied to EVs and batteries.

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While EV sales have failed to meet expectations, the use of lithium-ion batteries in battery energy storage systems has grown rapidly, with demand expected to remain strong in 2026 (Chart 3). The systems can play a critical role in integrating intermittent renewables (solar and wind) into the grid, smoothing fluctuations in wholesale electricity prices and aiding short-term grid stability.

The number of battery installations for power storage systems has risen rapidly for at least two reasons. First, prices of lithium-ion batteries have declined dramatically in recent years, improving their economics. Second, a significant amount of utility-scale solar has been installed as well. Batteries are often viewed as especially complementary to solar power, as batteries can charge up during the early part of the day and then discharge in the evening when solar ramps down and wholesale electricity prices can spike.

There is also a growing realization that data centers will be important new users of battery energy storage systems, particularly for backup power. The electricity requirements of some proposed facilities are extremely large, requiring widespread use of batteries. For example, the proposed Stargate 1 project in Abilene, Texas, may install batteries with a total capacity of 1 gigawatt, roughly equivalent to 6 percent of all batteries installed on the grid in the U.S. in 2025.