Trump’s EV tax drop in EV tax credits stimulates a surplus of battery threatening the growth of American manufacturing

The absence of incentives leads to slower electric vehicle sales, leaving battery producers with overcapacity. This could lead to slower production and expansion, as well as higher energy costs, weakening American manufacturing campaigns against China.

The United States is expected to deploy around 378 batteries gigawattheures by 2030, a decrease of 56% compared to what battery manufacturers were to produce before Trump’s second term, according to a Bloombergnef report published Thursday and summarized by the publication.

This trend should continue., Announced investments in the manufacture of batteries culminated in 2022, following the law on the reduction of inflation of the Biden era intended to encourage the production of vehicles and electrical components, according to the data of June 2025 of Research Firmrhodium Group. In 2024, investments dropped 80% compared to this 2022 peak and, during the first three months of 2025, companies canceled a record of $ 6 billion in batteries manufacturing ads. The clean energy company Freyr Battery, for example, said earlier this year that it had abandoned plans to build a factory of $ 2.6 billion in Georgia, citing the drop in battery prices as one of the reasons for the factory cancellation.

The massive drop in battery deployment is largely the result of the slowdown in electric vehicle demand, which coincided with the adoption of Trump’s “Big Beautiful Big Big Bill”, ending a $ 7,500 tax credit on vehicles. The consumer plans to buy a VE has reached their lowest level since 2019, according to a recent AAA report, with only 19% of respondents in the survey saying that they were “likely” or “very likely” to buy an EV as next vehicle.

“It is a combination of withdrawal of incentives, more perhaps a little stagnant interest of buyers, which leads to a drop in demand,” said Willy Shih, professor of business administration in the Harvard Business School, Fortune. “But the incentives are substantial.”

BNEF analyst Matthew Hales, specializing in commercial and supply chains, said Bloomberg The surplus, as well as the lack of government support for renewable energies, would be “a poisoned pill for American manufacturing hopes”.

“The president is holding his promise to stop subsidizing electric vehicles with American taxes,” said White House spokesperson Taylor Rogers Fortune in a declaration. “The administration remains attached to a first economic program in America prices, tax reductions and deregulation which strengthens American manufacturing without energetic EV mandates.”

Losing ground on the American manufacturing thrust

Trump made us to relocate the efforts a focal point of his second administration thanks to the implementation of steep prices intended to encourage domestic manufacturing. US Secretary of Commerce Howard Lutnick described the factory roles The “major jobs of the future”.

But the increase in battery stocks threatens this vision, said Shih. The slowdown in demand and the slowdown in manufacturing activity eliminates the innovation opportunities that accompany the production and creeping iteration, which means that the prices of locally produced locally check upwards.

These demand shocks create a “bullish effect” throughout the supply chain, according to Li Chen, professor of operations, technology and information management at SC Johnson College of Business at Cornell University. Lases consumer demand eventually grow, leading not only to a surplus, but also to a probable battery shortage due to a decrease in manufacturing capacities.

“The initial effect is the excess battery as we see now,” said Chen Fortune. “But after the battery manufacturers have reduced their capacity in response, my prediction is that there will be a shortage of (batteries) on the road with a great probability.”

Meanwhile, the global battery industry has continued to overcome Ion-lithium batteries, the manufacturing capacity announced by China for ion-lithium batteries exceeding the expected global demand of approximately 2025, according to Bloombergnef data. A price war between the giants of the manufacture of electric vehicles of China continued to lower the cost of the batteries produced by China.

“To face a fall in demand is actually very bad for the long -term health of the American manufacture of batteries,” said Shih. “And if you believe – as a lot of people do – that batteries are a key technology while the world evolves towards more electrification, it is not a good scenario.”

Tenous hopes for the manufacture of American batteries

Since the EV sector is not ready for immediate growth, battery producers will probably turn to other industries to compensate for low demand. The solar industry, for example, has a great need for batteries, said Shih. The industry is liable for buyout prices, a policy designed to support renewable energies by paying businesses a fixed price for the energy they produce.

This is a profitable model when the demand for solar energy is high, but when demand is low, companies will sometimes have to pay negative buy -back rates for its excess supply. Batteries that can store energy help eliminate the risk of bidder and negative buyout rates, according to Shih.

However, the Trump administration also continued after solar energy initiatives, claiming earlier this month, it would no longer approve of wind or solar projects, saying that they are increasing energy prices. Trump’s vision of continuing to rely on fossil fuels and natural gas is myopic, according to Shih.

“He looks at one thing at a time, instead of looking at the situation as a whole,” he said. According to Shih, this larger image includes the argument that the United States has a long-term winning by examining the long-term cost of energy, which could be cheaper if the United States was investing in the manufacture of batteries.

“The United States would benefit by being competitive on a global scale, but to do this, you must have someone who is ready to buy products so that you can invest in the manufacture and growth of this capacity, right?” Said Shih. “So it’s a bit of a contradiction.”