Tesla Strikes $4.3 Billion Contract with LG for American-Produced LFP Battery Supplies According to Rumors
Tesla Secures Major U.S. Lithium Iron Phosphate Battery Supply Deal with LG Energy Solution
Tesla has signed a significant $4.3 billion deal with LG Energy Solution (LGES) that will secure a major supply of U.S.-made lithium iron phosphate (LFP) batteries for Tesla's energy storage systems. This deal, which runs from August 2027 through July 2030 with an option to extend, is expected to reduce Tesla's reliance on Chinese battery imports and strengthen its domestic supply chain for energy storage.
The agreement aligns with growing U.S. tariffs on Chinese goods and represents a strategic pivot by both Tesla and LGES towards energy storage amid slowing electric vehicle (EV) demand. LGES is shifting focus from electric vehicle batteries towards energy storage systems (ESS), betting on increased demand driven by renewable energy and AI data centers.
These LFP batteries, optimized for stationary energy storage, are critical for Tesla’s Powerwall home batteries and Megapack utility-scale storage solutions. The deal acts as a hedge for Tesla, complementing its own in-house LFP cell production planned for late 2025, and ensuring flexibility to meet demand fluctuations across both electric vehicles and energy storage sectors.
The partnership enhances Tesla's capacity to continue leading the energy storage market with resilient, tariff-friendly battery supply chains and supports the broader transition to clean energy infrastructure in the US. LGES enjoys a first-mover advantage in the U.S. LFP market due to other players not having entered yet. The batteries will be supplied from LGES's factory in Michigan, where LGES began producing LFP cells in May.
Tesla's energy storage products, specifically the Powerwall and Megapack product lines, are intended for this LGES battery deal. Last year, Tesla produced 10,000 units of its energy storage products at its California plant in Lathrop. The details of the deal, including whether the batteries will be used for vehicles or not, have not been officially confirmed by LGES.
Elon Musk, CEO of Tesla, mentioned during the Q2 earnings call that energy is growing well despite headwinds from tariffs and supply chain challenges. Tesla's Chief Financial Officer (CFO), Vaibhav Taneja, highlighted that tariffs have had an "outsized" impact on the company's energy division. Partnerships like the one with LGES are critical for Tesla due to the high demand for batteries.
Tesla's utility-grade Megapack systems are a cornerstone in battery energy storage system (BESS) projects worldwide. The 1,000th Megapack was recently produced at Tesla's Shanghai Megafactory. Samsung Securities analyst Cho Hyun-ryul stated that LGES has a first-mover advantage in the U.S. LFP market.
This deal marks a shift in Tesla's efforts to reduce reliance on Chinese imports. Elon Musk, during the Q2 earnings call, emphasized that most people do not "appreciate just how gigantic the scale of battery demand is." The agreement with LGES is a significant step towards meeting this demand and positioning Tesla strongly amid evolving market demands and geopolitical trade pressures.
The deal between Tesla and LG Energy Solution (LGES) in securing U.S.-made lithium iron phosphate (LFP) batteries for energy storage systems is a strategic move towards reducing Tesla's reliance on Chinese battery imports and strengthening its domestic business in the finance and technology sectors. This partnership with LGES is crucial for Tesla's growth in the industry, particularly in the energy storage market, where the company aims to continue leading with resilient, tariff-friendly supply chains.
