FYI: AESC Halts U.S. Battery Factory Construction Due to Tariffs and EV Demand
AESC’s Ambitious Plans Hit Roadblocks
The Chinese-owned Automotive Energy Supply Corp. (AESC), a prominent player in the battery manufacturing sector, recently encountered significant obstacles in its ambitious U.S. expansion efforts. Originally planning a $3.6 billion investment in two new battery manufacturing plants in the United States, AESC has now suspended construction on both facilities.
Impact of Import Tariffs and Changing EV Market
The decision to pause construction stems largely from hefty import tariffs and a cooling demand for electric vehicles (EVs) within the U.S. New tariffs, especially a substantial 145% on machinery imported from China, have made essential equipment prohibitively expensive. Additionally, expedited construction efforts led to costly modifications, further complicating AESC’s path forward.
Current Status and Strategic Shifts
Currently, AESC operates a single U.S.-based battery plant in Tennessee, which has shifted its focus from EV battery pack production to industrial energy solutions, reflecting the current market trends and policy changes. This plant’s pivot underscores the impact of reduced EV demand and looming regulatory adjustments that disincentivize investment in EV manufacturing.
Despite securing over $150 million in public funding and inking deals with automotive giants like Mercedes-Benz and BMW, AESC’s original plans for large-scale U.S. manufacturing face significant downscaling. There’s a concerted effort to complete these facilities, aiming to create thousands of jobs once financial hurdles are cleared.
Funding Challenges and Future Directions
Financially, AESC hopes to secure a loan to finish their South Carolina facility, poised to supply BMW’s Smyrna plant as it starts EV manufacturing next year. Pivoting to industrial energy storage remains a crucial strategy to generate revenue for unfinished projects. According to The Washington Post, the beginning of 2025 saw approximately $6 billion worth of planned battery investments across the U.S. shelved, contradicting political narratives about reviving manufacturing jobs through current measures.
Political and Industry Repercussions
U.S. Senator Ron Wyden expressed concerns over the situation, highlighting the potential risk to hundreds of thousands of American manufacturing jobs. The tension between encouraging domestic EV production through federal tax incentives and the practical challenges faced by manufacturers like AESC continues to unfold.
Conclusion
AESC’s experience reflects broader industry challenges as supply chain complexities and shifting policies reshape the EV landscape. For further updates and insights, reach out to us at tips@automotive.fyi, or on Twitter @automotivefyi.
William Kouch, Editor of Automotive.fyi
