The 2022 Inflation Reduction Act (IRA) triggered a significant investment surge in electric vehicle (EV) battery manufacturing across Southern and Midwestern U.S. states, creating what industry insiders call the ‘Battery Belt.’ However, according to a June 18, 2025 report by the Rhodium Group’s Global Clean Investment Monitor, this momentum has begun to wane.
Investment Slowdown
In 2024, quarterly investments in EV battery manufacturing peaked at $11 billion, but by early 2025, projects worth $6 billion were either shelved or scrapped as production began outpacing actual EV sales. Several factors contribute to this slowdown. Consumer hesitation to adopt EVs remains high due to their elevated cost, range anxiety, and limited charging infrastructure. In the U.S., EVs currently account for just 10% of new car sales, significantly lagging behind China where over half of new vehicles are electric.
Political and Market Challenges
The political landscape is adding to the uncertainty. Some lawmakers are advocating to repeal key IRA incentives, including the $35/kWh battery credit and the $7,500 EV buyer credit, alongside plans to roll back emissions rules. Without these crucial incentives, U.S.-produced batteries would become substantially more expensive, potentially causing automakers to scale back domestic production in favor of cheaper alternatives, particularly from China. Geopolitical tensions and shifting tariff policies further complicate the situation.
Risk of Stranded Assets
Between 2021 and 2024, investment in EV supply chains increased more than sixfold, with over $200 billion in announcements since 2018, approximately three-quarters of which was dedicated to battery production. However, in the first quarter of 2025, EV investment dropped by 4.5%, while battery investment plummeted 11.4% compared to the previous quarter. Only about 25% of projects initiated since 2018 are operational, with a mere 7% of those started post-IRA being active. As the market adjusts, manufacturers are reassessing their battery requirements, raising concerns that some newly constructed or partially completed plants might become ‘stranded assets’ if the anticipated EV boom fails to materialize.
The Future of U.S. EV Manufacturing
If more plants stall, it could not only hinder clean energy progress but also jeopardize thousands of jobs, particularly in states that offered significant tax breaks to attract these projects. Economists caution that the future of America’s battery plants—and the broader EV transition—hinges on three critical factors: consistent policy support, stronger EV demand, and maintaining global competitiveness. Long-term tax credits and robust emissions rules are essential for instilling confidence among car manufacturers and investors. However, increased EV adoption is necessary to keep production plants operational. Moreover, if Chinese batteries continue to be cheaper, the U.S. must compete strategically to avoid being outpriced.
The challenge ahead is multifaceted, requiring a balanced approach to policy, market demand, and global competition. As the situation continues to evolve, the fate of the U.S. EV industry remains uncertain, with significant implications for clean energy goals and employment across various regions.
