Tesla inks $4.3 billion agreement with LG for manufacturing LFP batteries domestically in the U.S., according to a recent report.
Tesla Strengthens Energy Storage Supply Chain with $4.3 Billion Deal
Tesla has signed a significant deal with LG Energy Solution (LGES) to secure the supply of lithium iron phosphate (LFP) batteries for its energy storage systems (ESS), such as Megapacks and Powerwalls, starting from August 2027 through July 2030, with a potential extension to 2034.
The deal, worth $4.3 billion, is a strategic move by Tesla to address its current reliance on Chinese-made LFP cells amid escalating trade tensions and tariffs between the US and China. LGES will manufacture the batteries at its US plants in Michigan, Ohio, and Tennessee, ensuring they avoid high US tariffs on Chinese imports.
The agreement is LG Energy Solution’s largest energy storage contract, representing roughly 23–25% of their annual sales revenue, highlighting the importance of Tesla as a key client in the evolving US battery market.
The LFP batteries will primarily be used for Tesla's energy storage products, with the total supply volume projected at about 50 GWh over the contract period. This substantial supply will help Tesla meet the growing demand for energy storage globally and reduce its dependency on Chinese battery imports.
Key Points:
- Deal value: $4.3 billion
- Battery type: Lithium iron phosphate (LFP)
- Intended use: Tesla energy storage systems (Megapacks, Powerwalls)
- Production location: LG Energy Solution US plants (Michigan, Ohio, Tennessee)
- Contract duration: August 2027 – July 2030, extendable to 2034
- Total supply volume: Approximately 50 GWh of LFP cells
- Impact: Reduces Tesla’s dependency on Chinese battery imports; supports US-made ESS expansion; enables Tesla to meet growing demand for energy storage globally
This partnership is crucial for Tesla to meet the growing demand for LFP batteries and expand its energy storage market internationally. The deal allows Tesla to bolster its energy storage product supply chain domestically amid geopolitical challenges.
The strategic $4.3 billion deal with LG Energy Solution (LGES) strengthens Tesla's energy storage supply chain, mainly using lithium iron phosphate (LFP) batteries, which are set for production at LGES's US plants in Michigan, Ohio, and Tennessee. This partnership in the technology sector not only reduces Tesla's reliance on Chinese battery imports in the finance industry but also enables the company to contribute to the growth of the energy storage market, primarily through the production of Megapacks and Powerwalls, with a total supply volume of approximately 50 GWh over the contract duration.
