Honda begins production of batteries for data centers at a factory initially constructed for electric vehicles that was later scrapped.

      Honda has started producing energy storage batteries at its facility in Ohio, transitioning from the cancelled EV program that resulted in a $16 billion write-down. The factory, which was initially set up to provide cells for electric vehicles that were scrapped three months ago, will now supply batteries to data centers instead of households.

      This change follows Honda's March decision to cancel three electric vehicles for the U.S. market, an action that led to significant financial losses for the company. Honda operates the Ohio plant as part of a joint venture with LG Energy Solution, although it purchased LG’s share of the facility for nearly $3 billion late last year.

      This shift comes amid disappointing demand for electric vehicles in the United States. The federal tax credit for new EVs expired last September after being eliminated by Congress, leading to a year-over-year decline in sales as consumers who rushed to make purchases to benefit from the credit left a gap in demand.

      Honda is not alone in redirecting battery production towards stationary storage. Ford established a new subsidiary called Ford Energy in May, investing $2 billion to create large-scale storage systems in a repurposed plant in Kentucky. General Motors also announced three partnerships focused on energy storage this month, including a sodium-ion battery development collaboration with Peak Energy. Tesla, which was a pioneer in this sector with its Megapack, reportedly achieves gross margins of about 30% on energy storage, roughly double the profit from its vehicle sales.

      The market for stationary battery storage is rapidly expanding. According to SEIA and Benchmark Minerals, U.S. installations reached a record of nearly 10 gigawatt-hours in the first quarter of 2026, reflecting a 32% year-over-year increase. This capacity is equivalent to that required for approximately 120,000 electric vehicles.

      Growth is anticipated to accelerate, with SEIA forecasting that annual installations will hit 110 gigawatt-hours by the end of the decade, nearly tripling the current rate. While much of this demand is fueled by data centers, a significant portion also comes from grid operators who utilize batteries to stabilize power supplies and support wind and solar energy production.

      For Honda, the strategic reasoning is clear: after investing billions in battery manufacturing for an electric vehicle program it has since abandoned, stationary storage presents an opportunity to keep production lines operational while the U.S. EV market stabilizes. However, whether Honda can remain competitive in a space where Tesla, Ford, and GM have already established themselves is an open question.