Report Highlights

Batteries in the U.S.: Market Overview

The U.S. battery market was valued at USD 58.7 billion in 2024 and is forecast to reach USD 121.3 billion by 2032. Demand spans automotive starting batteries, lithium-ion cells for electric vehicles, grid storage, and consumer electronics. Lead-acid retains the largest installed base, while lithium-ion captures most new investment. Private capital has led cell manufacturing, with Tesla, LG Energy Solution, and Panasonic Energy building plants, while government shaped their location.

Government has been the dominant force in where capacity sits, rather than whether demand exists. The Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022 redirected investment toward domestic supply chains. Grid storage and EV demand were driven mostly by private contracts, utility procurement, and automaker commitments. The result is a market where federal credits determine plant location while commercial demand determines volume.

Policy-Driven Growth in U.S. Batteries

Section 45X of the Inflation Reduction Act pays manufacturers $35 per kilowatt-hour for cells and $10 per kilowatt-hour for modules, with credits tied to domestic production volumes. This converts domestic cell output into a bankable revenue stream, which is why Ultium Cells and LG Energy Solution expanded output. Section 48E extends a 30 percent investment tax credit to standalone storage systems, accelerating utility-scale deployments. Developers can monetize that credit through transferability, lowering the cost of capital for projects.

The Infrastructure Investment and Jobs Act allocated $7 billion to the Department of Energy's battery materials processing, manufacturing, and recycling programs, funding domestic refining and cell lines. Section 301 tariffs raised duties on Chinese lithium-ion EV batteries to 25 percent in 2024, shifting OEM sourcing toward domestic and allied suppliers. Together these measures convert trade protection into capital investment across Georgia, Ohio, and Michigan, expanding factory capacity and boosting domestic battery demand.

Regulatory Barriers and Compliance Costs

The Pipeline and Hazardous Materials Safety Administration regulates lithium battery transport under 49 CFR Parts 171 to 180, requiring UN 38.3 test summaries for each cell design before shipment. Manufacturers face testing and documentation costs that frequently reach tens of thousands of dollars per design, delaying prototype-to-production timelines by several months. Smaller cell suppliers absorb these costs most heavily, while larger producers spread them across existing certification programs.

Grid-scale storage faces permitting delays because NFPA 855 governs installation, and state fire marshals and local authorities adopt its editions at different times. Projects must also show UL 9540A thermal runaway test data, which can add months to siting and interconnection reviews. Spent batteries fall under EPA universal waste rules in 40 CFR Part 273 and state hazardous-waste programs, adding handling and recycling compliance costs.

Policy-Created Opportunities in the U.S.

Section 45X credits for critical minerals processing and recycling create a route for recyclers such as Redwood Materials to earn revenue from black mass recovered from end-of-life cells. The Department of Energy Loan Programs Office has issued conditional commitments for battery plants, opening project finance to developers that can document domestic content and labor standards. Recyclers and materials processors able to certify feedstock origin will capture the first wave of these awards.

The National Electric Vehicle Infrastructure program, funded at $5 billion under the Infrastructure Investment and Jobs Act, drives demand for battery storage paired with fast chargers at highway sites. FERC Order 841 requires regional transmission operators to open wholesale markets to storage resources, enabling battery projects to earn capacity and energy revenue. Developers combining storage with NEVI-funded charging gain both incentive streams under one permit.

Market at a Glance

Leading Market Participants

• Tesla
• LG Energy Solution
• Panasonic Energy
• Samsung SDI
• SK On
• Ultium Cells
• EnerSys
• Clarios
• Exide Technologies
• Redwood Materials

Regulatory and Policy Environment

The primary legislation is the Inflation Reduction Act of 2022, Public Law 117-169, which created Sections 45X and 48E of the Internal Revenue Code. The Internal Revenue Service and Treasury administer these credits, and prohibited foreign entity rules require suppliers to certify non-Chinese-controlled sourcing. Section 301 tariffs on non-EV lithium-ion batteries rise to 25 percent on 1 January 2026, while the One Big Beautiful Bill Act ended the 30D consumer EV credit after 30 September 2025.

Compared with peers, the U.S. framework relies on tax credits and tariffs rather than mandates. The European Union's Battery Regulation, Regulation (EU) 2023/1542, requires digital battery passports from February 2027 and carbon footprint declarations, obligations the U.S. has not adopted. China's GB 38031-2025 thermal propagation standard takes effect in July 2026. The U.S. pays $35 per kilowatt-hour on cells under Section 45X, the highest per-unit production incentive among the three.

Long-Term Policy Outlook for U.S. Batteries

By 2032, Section 45X credits will be phased down under the statute's schedule beginning after 2029, shifting manufacturers from subsidy dependence toward tariff protection. Treasury guidance on prohibited foreign entity rules will tighten material-assistance tests, forcing cathode and anode suppliers to restructure ownership. EU battery passport obligations will reach exporters from U.S. plants, extending traceability requirements across the Atlantic.

The market will shift from subsidy-led construction toward operating economics, with grid storage and data center backup becoming the largest growth categories. FERC Order 841 and state storage procurement will keep stationary demand rising, while lead-acid retains its starting-lighting-ignition base. Recycling capacity will become a policy priority as end-of-life volumes rise, making feedstock certification the decisive compliance requirement for domestic producers.