Global EV Battery Boom Turns to Glut as Demand Slows

A Global Battery Surplus Emerges

The electric vehicle industry is facing a new kind of bottleneck—not a shortage, but a massive oversupply of EV batteries. According to a new report from consulting firm AlixPartners, global battery manufacturing capacity now far exceeds actual demand across all major regions.

In North America, factories can produce 1.9 times more batteries than the market currently requires. In Europe, that ratio climbs to 2.2, and in China, it soars to an extraordinary 5.6 times the demand. This imbalance signals a new challenge for the industry that, only a few years ago, was racing to overcome shortages.

China’s Overcapacity Problem

China’s dominant battery industry, which benefited from years of heavy government subsidies, now faces intense pressure. With Western tariffs limiting exports of Chinese EVs and components, the nation’s excess capacity has few global outlets.

But as Rohit Gujarathi, Senior Vice President at AlixPartners, points out, the issue is not limited to China. “At the industry scale, globally, five times the demand versus three times the demand is not really very different,” he said. “No matter where you go, capacity is still way beyond what the demand is.”

Even in North America, where production looks more balanced, the market remains underdeveloped in key battery chemistries such as lithium-iron-phosphate (LFP) cells—favored for their durability and lower costs. The U.S. lacks sufficient LFP manufacturing to meet long-term affordability goals.

Why Demand Fell Short

Despite rapid investment, consumer demand for EVs has lagged far behind expectations. Analysts blame high purchase prices and the rollback of government incentives for slowing adoption.

“What consumers care about is price,” Gujarathi explained. “Does it make economic sense? In most cases, no—especially as government support has been taken away.”

While oversupply might push prices down temporarily, battery production and material costs remain stubbornly high, making it difficult for automakers to lower prices sustainably. The result: thinner profit margins and growing financial stress among battery producers.

Policy Shifts Deepen the Slowdown

The situation has worsened in the United States, where the federal EV tax credit has expired and emission standards have been relaxed. These changes remove two of the biggest policy drivers of EV adoption, potentially leading to a market contraction in 2025 and beyond.

AlixPartners projects that the capacity-to-demand ratio will climb to 2.4 by 2028 and remain at that level through 2030. The firm has also cut its EV adoption forecast in half, now predicting that only 18% of new U.S. car buyers will choose EVs by 2030, down from 36% in last year’s projection.

Industry Response: Retrenchment and Realignment

To deal with the glut, automakers and suppliers are beginning to consolidate existing plants and redirect investments. A recent example includes General Motors selling its stake in a joint battery venture with LG Energy Solution. Others are retooling facilities to produce energy storage systems rather than EV batteries.

At the same time, several companies are exploring new U.S.-based LFP battery factories to cut costs and support future affordable EVs. GM’s plan to use North American LFP cells in the next Chevy Bolt fits this strategy—but long-term demand for low-cost EVs remains uncertain.

A Market in Flux

For now, automakers appear to be in a holding pattern. “Everybody right now is waiting, because the ground is shifting underneath them,” Gujarathi said. “That may continue for quite a while.”

The oversupply crisis could delay future investments, forcing companies to stay flexible with battery chemistry, technology, and model plans. In the short term, the imbalance may bring price relief to buyers, but in the long run, it could slow innovation and stall the growth of the global EV market.

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