Billion-dollar battery plant pauses construction amid electric vehicle and tariff uncertainty

Key Points

• AESC has paused construction on its $1.6 billion battery plant in Florence, S.C., blaming policy and market uncertainty over federal EV tax credits and potential tariffs.
• The Japanese firm has already invested $1 billion but vows to restart work later and maintain its pledge to hire 1,600 workers and invest the remaining $600 million.
• BMW says its nearby battery assembly plant in Greer remains on track for a 2026 opening despite AESC’s construction halt.
• Gov. Henry McMaster and state officials warn that high tariffs could threaten major foreign investments but express confidence that talks with the administration will safeguard EV incentives.

COLUMBIA, S.C. (AP) — A Japanese company has halted construction on a $1.6 billion factory in South Carolina to help make batteries for electric BMWs, citing “policy and market uncertainty.”

While Automotive Energy Supply Corp. didn't specify what those problems are, South Carolina's Republican governor said the company is dealing with the potential loss of federal tax breaks for electric vehicle buyers and incentives for EV businesses as well as tariff uncertainties from President Donald Trump's administration.

“What we’re doing is urging caution — let things play out because all of the these changes are taking place,” Gov. Henry McMaster said.

AESC announced the suspension in construction of its plant in Florence on Thursday,

“Due to policy and market uncertainty, we are pausing construction at our South Carolina facility at this time," the company's statement said.

AESC promised to restart construction, although it didn't say when, and vowed to meet its commitment to hire 1,600 workers and invest $1.6 billion. The company said it has already invested $1 billion in the Florence plant.

The battery maker based in Japan also has facilities in China, the United Kingdom, France, Spain and Germany. In the U.S., AESC has a plant in Tennessee and is building one in Kentucky. The statement didn't mention any changes with other plants.

The South Carolina plant is supposed to sell battery cells to BMW, which is building its own battery assembly site near its giant auto plant in Greer. BMW said the construction pause by AESC doesn’t change its plans to open its plant in 2026.

AESC has already rolled back its South Carolina plans. They announced a second factory on the Florence site, but then said earlier this year that their first plant should be able to handle BMW's demand. That prompted South Carolina officials to withdraw $111 million in help they planned to provide.

The company is still getting $135 million in grants from the South Carolina Department of Commerce and $121 million in bonds and the agency said a construction pause won't prompt them to claw back that offer.

South Carolina is investing heavily in electric vehicles. Volkswagen-owned Scout Motors plans to invest $2 billion and hire 4,000 people for a plant to build its new electric SUVs scheduled to open in 2027.

The state has for decades made big bets on foreign manufacturers like BMW, Michelin and Samsung that have paid off with an economic boom this century, but there is uneasiness that Trump's flirtation with high tariffs might stagger or even ruin those important partnerships.

McMaster told people to relax as state and business leaders are talking to Trump's administration and things will work out.

“I think the goal of the president and the administration is to have robust economic growth and prosperity and there is no doubt there has to be changes made in our international trade posture and President Trump is addressing that,” McMaster told reporters Thursday.