Energy Storage Funding Plunges 81% in Q1 2025 Amid EV Sector's Margin and Liquidity Pressures

Industry expert Jeff Lutz recently highlighted significant financial challenges facing companies within the electric vehicle (EV) battery sector, pointing to heavy discounting, missed gross margins, and cash burn despite robust sales. His observations come as corporate funding for energy storage companies experienced a dramatic 81% year-on-year decline in the first quarter of 2025.

In a recent social media post, Jeff Lutz, an executive advisor with extensive experience in supply chain and manufacturing for tech and EV industries, articulated the precarious financial state of some entities. Lutz stated, > "Sales are robust, just have to heavily discount 🙄that’s all, miss gross margins, & burn cash after a surprise Q1 capital raise … Paying suppliers is a real b …" This tweet underscores a paradox where market demand for EVs is growing, yet profitability and liquidity remain under severe pressure.

The context for these struggles is evident in recent market reports. While global battery electric vehicle (BEV) sales surged by 42% year-on-year in Q1 2025, according to PwC and Strategy&, this growth has been accompanied by intense price pressures. Manufacturers are increasingly resorting to discounting to move inventory, directly impacting gross margins. This dynamic forces companies to prioritize sales volume over profit per unit, leading to the "miss gross margins" scenario described by Lutz.

Further exacerbating the situation, Mercom Capital Group's Q1 2025 report revealed a sharp downturn in corporate funding for energy storage companies, with total funding dropping to $2.2 billion from $11.7 billion in Q1 2024. This significant reduction in capital inflow, driven by geopolitical uncertainties and policy shifts, makes it challenging for companies to sustain operations and invest in future growth. The "surprise Q1 capital raise" mentioned by Lutz suggests that even companies that secured fresh capital are quickly burning through it, indicating deep-seated operational inefficiencies or an underestimation of market headwinds.

The financial strain is also manifesting in difficulties with supplier payments, a critical indicator of liquidity issues. The recent bankruptcy filing by Northvolt, a prominent European EV battery manufacturer, in March 2025, serves as a stark example of these industry-wide challenges. Northvolt cited rising capital costs, supply chain disruptions, and shifting market demand as factors, underscoring the precarious environment even for well-funded players. This mirrors Lutz's concern about "paying suppliers."

Experts note that while lower critical mineral prices can reduce battery costs, overcapacity in the manufacturing sector is forcing many companies into a struggle for survival. The need for external financing remains high as internal revenues often fall short of covering existing and new project costs. The ongoing volatility in the EV battery supply chain, coupled with intense competition and the need for significant capital expenditure, continues to test the resilience of companies in this rapidly evolving sector.