In the United States there are a slowdown in the electric vehicle industry, which has caused more and more manufacturers in the sector to convert their business. According to account Financial Times, ten North American factories that produced batteries for electric cars are allocating a good part of their production to energy storage systems for AI data centers. It is the latest industry to readjust around artificial intelligence.
The change of course. The media shares data from the consulting firm CRU, which states that these ten plants have canceled enough capacity to produce batteries for 2 million electric vehicles. Of these, seven will focus primarily on the energy storage systems (ESS) market.
Among the names involved are Ford, which is converting a factory in Kentucky, and Stellantis along with its partner Samsung SDI, which are converting production lines at its Indiana plant. General Motors is also considering producing its own energy storage batteries, according to declared its head of batteries, Kurt Kelty, to the Financial Times.
Why data centers need batteries. Data centers that process AI models require uninterrupted power supply to protect against blackouts or voltage fluctuations. With the construction boom of these centers in the United States, storage batteries have become a critical component of infrastructure. This opens up an alternative revenue stream for automotive companies struggling with electric vehicles.
The Tesla example. It is worth taking a look at the numbers of Elon Musk’s company, since in addition to producing vehicles it also manufactures energy storage systems such as Megapack and Powerwall. In this sense, its battery business is turning out to be tremendously profitable, since the company reported income for energy and storage of $12.8 billion in its last quarter, a growth of 27% year-on-year. In 2021, that figure barely reached 2.8 billion. Meanwhile, its revenue from electric vehicle sales has fallen 9% to $64 billion.
Political context difficult. Just like account FT, Since the Trump administration eliminated tax incentives for electric vehicle buyers put in place during the Biden era and lowered emissions standards, the electric vehicle market in the United States has seen a slowdown. This has led BloombergNEF to revise its forecast downwards: from expecting electric vehicles to represent 48% of total car sales in 2030, they now project only 27%. Electric vehicles currently account for about 8% of new car sales in the United States.
The aid that is maintained. As well as mention In the middle, although these subsidies have been eliminated, the administration retains generous incentives for battery manufacturers: a production credit of $35 per kilowatt-hour and a 30% tax credit for investments in energy storage. In addition, tariffs on Chinese storage batteries are around 60%, allowing manufacturers to produce in the United States at prices close to parity with Asian imports.
Between the lines. It is also worth highlighting important nuances. CRU’s Sam Adham counted to FT that battery manufacturers will not necessarily pass on what they save on costs to their customers (they may increase their margins, for what). In addition, according to the FT, the Korean companies that lead the production of storage batteries in the United States have less experience with the lithium iron phosphate technology used by these systems, compared to their Chinese rivals.
It is not a total reconversion, for now. Wood Mackenzie’s data suggest that electric vehicles will continue to absorb a greater proportion of battery installations than energy storage until the end of 2030. “If there is a rebound in demand for electric vehicles, companies that have switched to storage systems could be left behind,” said Milan Thakore, an analyst at the consultancy.
More sectors than They pivot towards AI. From the Semafor newsletter, also they mention another very interesting sector that is beginning to convert its business towards AI: cryptocurrency miners. And according to Morgan Stanley, facilities dedicated to cryptocurrency mining are seeing a more profitable business in the creation of data centers for AI.
The economics of cryptocurrency mining have gotten worse and worse since the reward is lower, and converting these facilities into infrastructure for artificial intelligence is much more profitable. According to the calculations Morgan Stanley, transforming all bitcoin mining facilities in the United States could reduce the electrical capacity deficit for data centers by between 10 and 15 gigawatts.
Cover image | CHUTTERSNAP and İsmail Enes Ayhan
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