Honda shifts battery focus from EVs to stationary storage

Honda has officially begun production of batteries destined for energy storage systems this week, according to a report from Nikkei Asia. The strategic pivot comes three months after the Japanese automotive manufacturer canceled its electric vehicle (EV) programs in the U.S. The batteries were originally slated to be manufactured at an Ohio factory operated under a joint venture with LG Energy Solution. Instead of powering passenger vehicles, these battery cells will now be directed to stationary storage systems—large-scale batteries used to stabilize power grids or support data centers.

The shift in strategy follows a challenging period for Honda’s EV ambitions. The automaker wrote down $15.7 billion last fiscal year, an accounting action to reduce the book value of its assets, partly to restructure its EV operations. This write-down was also driven by a weakening business in China, where EV sales have otherwise soared. In the U.S., demand for EVs has softened after tax credits designed to spur domestic production disappeared last September. This regulatory uncertainty led Honda to cancel three EV models destined for the U.S. market, though the company chose to maintain its joint venture with LG Energy Solution to target the energy storage sector.

By repurposing its battery production, Honda is entering an expanding market alongside competitors like Tesla, Ford, and GM. Stationary storage has become a profitable standalone business. For instance, Tesla rakes in 30% gross profits on its Megapacks (its large-scale battery storage product) and Powerwalls, which is about twice its profit margins on vehicles. Many of these stationary batteries are installed at data centers or connected to the grid to stabilize power supplies and augment renewable energy installations.

According to a report from the Solar Energy Industries Association (SEIA) and Benchmark Minerals, the market for stationary storage is growing:

• The stationary storage market is growing 32% year-over-year.
• In the first quarter of this year, 9.7 gigawatt-hours of energy storage systems were installed, which is enough battery capacity to build roughly 120,000 EVs.
• The report estimates that annual installations will reach 110 gigawatt-hours by the end of the decade, nearly tripling the size of the market.

Why it matters

Honda is shifting its battery production strategy from EVs to data center energy storage, reflecting a broader industry trend of automakers entering the stationary storage market amid soft EV demand.