Honda Begins Production of Batteries for Energy Storage Systems

Honda this week began production of batteries destined for energy storage systems, according to a report from Nikkei Asia. The milestone makes Honda the latest car company to dive into the red-hot energy market.

The automaker’s shift toward energy storage comes three months after Honda canceled its EV programs in the U.S. Batteries for the EVs were slated to be made at a factory in Ohio, which Honda operates under a joint venture with LG Energy Solution. Now, those cells are headed to data centers instead of driveways.

Honda’s pivot comes as demand for EVs in the U.S. remains soft following the GOP’s cancellation of tax credits, which were intended to spur EV and battery production in the U.S. Sales of new EVs remain down year-over-year, in part because consumers pulled forward their purchases to take advantage of the tax credits, which disappeared last September.

That uncertainty led Honda to dramatically shift gears, canceling three EVs that were destined for the U.S. market. The automaker wrote down $15.7 billion last fiscal year, in part to restructure its EV strategy. Its weakening China business, where EVs have soared, also contributed to the write-down.

But despite the restructuring, Honda didn’t dissolve its joint venture with LG Energy. And like seemingly every other automaker, including Tesla, Ford, and GM, Honda decided that batteries are a big business on their own.

The market for stationary storage has been booming, growing 32% year-over-year, according to a report from SEIA and Benchmark Minerals. In the first quarter of this year, 9.7 gigawatt-hours of energy storage systems were installed. That’s enough batteries to build roughly 120,000 EVs.

The breakneck growth is expected to continue. By the end of the decade, the report estimates that 110 gigawatt-hours of energy storage will be installed every year, nearly tripling the size of the market.

It’s been a profitable market, too. Tesla, which has claimed the majority of sales so far, rakes in 30% gross profits on its Megapacks and Powerwalls, about twice its margin on vehicles.

Many stationary batteries have been installed at data centers, but a large chunk of them end up connected to the grid. As battery prices have fallen, they’ve carved out a sizable niche stabilizing the grid while also augmenting wind and solar installations, making them more predictable generating sources.

Honda may not be sure how to approach the EV market in the U.S., but it’s clear it wants in on the energy transition in one form or another.