diff --git a/package.json b/package.json
index 1a784df3157..99b90f59498 100644
--- a/package.json
+++ b/package.json
@@ -80,11 +80,23 @@
   },
   "babel": {
     "presets": [
-        "es2015"
+      [
+        "es2015",
+        {
+          "modules": false
+        }
+      ]
     ],
     "plugins": [
       "transform-object-assign"
-    ]
+    ],
+    "env": {
+      "test": {
+        "presets": [
+          "es2015"
+        ]
+      }
+    }
   },
   "config": {
     "validate-commit-msg": {
diff --git a/webpack.config.js b/webpack.config.js
index 633ec0ae3f0..4796265992e 100644
--- a/webpack.config.js
+++ b/webpack.config.js
@@ -41,6 +41,11 @@ const createBannerPlugin = () => new webpack.BannerPlugin({
   entryOnly: true,
 });
 
+const LIFECYCLE_EVENT = process.env.npm_lifecycle_event;
+if (LIFECYCLE_EVENT == 'test' || LIFECYCLE_EVENT == 'test:watch') {
+  process.env.BABEL_ENV = 'test';
+}
+
 module.exports = [{
   name: 'js-components',
   entry: {
@@ -92,7 +97,6 @@ module.exports = [{
   module: {
     rules: [{
       test: /\.js$/,
-      include: [path.resolve(__dirname, 'packages/material-components-web')],
       exclude: /node_modules/,
       loader: 'babel-loader',
       options: {