Chinese Battery Giants Pivot to Energy Storage as EV Demand Stalls

The global electric vehicle (EV) boom that once seemed unstoppable is showing cracks, and Chinese battery manufacturers are scrambling to adapt. As governments roll back subsidies and consumer enthusiasm for EVs cools, these industry titans are shifting gears—literally—toward energy storage solutions.

Local Disconnect in Hungary

In Hungary, the disconnect between local communities and the green energy transition is stark. While massive lithium battery factories have sprung up across the country, most of their output is destined for wealthier Western European markets. “The average Hungarian has the money to buy a 10-year-old used car from Germany, usually powered by diesel or gas. They don’t have the money to buy electric vehicles,” explains local expert Bartók.

This geographic and economic divide means that while Hungary hosts these cutting-edge facilities, its residents remain largely excluded from the benefits of the EV revolution. The batteries rolling off Hungarian production lines will power luxury electric vehicles in Germany, France, and the Netherlands—not the aging diesel cars that dominate Hungarian roads.

Sluggish Global Demand Forces Recalibration

The EV slowdown has hit Chinese battery makers particularly hard. Among 68 factory investments identified globally, at least five have been paused or canceled outright, even after construction had begun. This retrenchment reflects a harsh reality: consumer adoption of electric vehicles in Europe and North America has proven far more gradual than the explosive growth seen in China.

Chinese battery companies had planned their aggressive global expansions during a period of generous government subsidies for both factory construction and consumer purchases. Now, with that support evaporating, they’re being forced to recalibrate their strategies. In the United States, the Inflation Reduction Act initially incentivized both Chinese and American companies to build factories, but subsequent policy shifts under President Trump saw EV subsidies canceled entirely.

Even Europe, which had set an ambitious target to cease gas car production entirely by 2035, is now having second thoughts about its timeline. “Battery manufacturers, of course, would be less incentivized to make a big investment if they are not sure what the policy direction is,” notes Alexander Brown, senior analyst at the Mercator Institute for China Studies.

Pivot to Energy Storage: The Backup Plan

As the EV market cools, Chinese battery companies are deploying their backup strategy: pivoting to energy storage. Ford, which is building a massive battery plant in Michigan using CATL’s manufacturing technology, announced in December that it would shift from making EV batteries to producing those for energy storage. Similarly, Envision AESC, another major Chinese battery company whose US expansion plans were on hold for much of last year, recently announced its Tennessee plant will transition from EV battery production to storage batteries.

This pivot makes strategic sense. While some segments of the traditional automotive industry lobby against EVs, there’s broad consensus about the need for more grid-level and home energy storage to prevent power outages and enable consumers to sell electricity back to the grid. (Though not everyone is pleased—Pakistan’s national utility operator and Chinese banks financing it are notably unhappy about the rise of Chinese storage batteries, as detailed in another piece in this package.)

The energy storage market offers a politically neutral alternative. In the United States, both deeply Democratic California and Republican Texas have become heavy adopters of grid-level battery storage, suggesting that Chinese ambitions for building more storage battery factories will likely find receptive markets regardless of political shifts.

The Irony of Reverse Technology Transfer

For partner companies and governments working with Chinese battery makers to bring factories to their countries, the initial goal was clear: exchange market access and subsidies for the promise that these firms would eventually train local workers to produce state-of-the-art batteries independently.

The irony here is profound and should not be lost on anyone following the global automotive industry. Over the last three decades, American, European, Japanese, and Korean automakers were more than happy to exchange their technological know-how for access to the Chinese auto market. But today, that relationship has been reversed.

Chinese battery makers are now the ones bringing advanced manufacturing capabilities to foreign shores, while simultaneously learning from local conditions and adapting their products accordingly. This reversal of the traditional technology transfer dynamic represents a fundamental shift in the global automotive and energy landscape.

As Chinese battery manufacturers continue their pivot toward energy storage, the question remains whether this strategy will prove sufficient to maintain their growth trajectory in an increasingly uncertain global market. What’s clear is that the battery industry’s center of gravity continues to shift, with China remaining at the heart of this transformation—even as it adapts to new market realities.

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The pivot to energy storage represents not just a business strategy but a fundamental reimagining of how batteries will power our future. As Chinese manufacturers adapt to slower EV adoption, they’re positioning themselves at the forefront of the energy transition—proving once again that in the battery business, flexibility is just as important as capacity.

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