Honda repurposes EV battery production as AI data center backup power, converting stranded auto-supply capex into energy infrastructure.
Honda this week began production of batteries for energy storage systems, marking its entry into a market that automakers are increasingly viewing as a natural extension of EV battery manufacturing. The company's Ohio factory—a joint venture with LG Energy Solution—will now supply data centers rather than consumer vehicles, giving the facility a purpose after Honda canceled its U.S. EV programs just three months earlier.
The pivot reflects broader headwinds in the American EV market. The GOP's cancellation of federal tax credits, intended to spur domestic EV and battery production, devastated demand. Consumers had front-loaded purchases to capture the credits before they expired last September, leaving the market soft. Honda's response was drastic: it canceled three EVs destined for the U.S., wrote down $15.7 billion in the last fiscal year to restructure its EV strategy, and contended with a weakening China business where EVs have nonetheless soared.
Yet Honda preserved its partnership with LG Energy, joining Tesla, Ford, and GM in recognizing that batteries represent a standalone business. GM is already manufacturing sodium-ion cells for grid storage tied to data center demand, while Waymo plans to convert retired robotaxi batteries into grid storage across California and Texas.
The stationary energy storage market has surged, expanding 32% year over year according to SEIA and Benchmark Minerals. In the first quarter alone, 9.7 gigawatt-hours of capacity were installed—enough batteries to manufacture roughly 120,000 EVs. That growth is expected to accelerate, with the market forecast to reach 110 gigawatt-hours annually by decade's end, nearly tripling its current size.
The margins are compelling. Tesla, which dominates stationary battery sales, reports 30% gross profits on Megapacks and Powerwalls—roughly double its vehicle margins. As battery cell prices continue falling with advancing technology, competition is intensifying across the sector.
Stationary batteries serve dual purposes: while many power data centers, a substantial portion interconnects to the grid, stabilizing supply and smoothing variable renewable output into predictable power.
Honda and LG Energy announced their joint venture in 2022 with plans for $4.4 billion in investment and 40 gigawatt-hours of annual cell capacity. The plant opened in 2025, precisely as the U.S. EV market cooled. In December, LG Energy agreed to sell the facility and related assets to Honda for $2.85 billion—a restructuring framed as improving operational efficiency while maintaining the partnership.
Energy storage production represents a transitional strategy. Honda plans to begin manufacturing hybrid vehicle batteries at the Ohio site in 2028, adjusting output between storage and hybrid cells as electrification trends shift. This move will allow Honda to bring hybrid battery production in-house, reducing costs and ending its reliance on a Toyota facility in North America. While Honda may still be determining its path forward in the U.S. EV market, it is positioning itself across the broader energy transition.