Tesla has entered into a $4.3 billion agreement with South Korea’s LG Energy Solution (LGES) to supply lithium iron phosphate (LFP) batteries for the electric automaker’s energy storage systems, according to a person familiar with the arrangement. The batteries will be produced at LGES’s Michigan factory, with deliveries scheduled between August 2027 and July 2030. The contract includes an option to extend the supply period by as much as seven years and to increase volumes based on further discussions.
LGES confirmed on July 30 that it had secured a global, three-year order worth $4.3 billion for LFP batteries but did not identify the customer or specify whether the cells were intended for vehicle or stationary storage applications. By sourcing batteries from a U.S. facility, Tesla aims to reduce its dependence on Chinese imports, which have been subject to U.S. tariffs.
In April, Tesla Chief Financial Officer Vaibhav Taneja noted that U.S. duties on Chinese-made LFP cells had significantly affected the company’s energy business. “We will also be working on securing additional supply from non-China-based suppliers, but it will take time,” he said. This LGES deal is part of Tesla’s broader effort to diversify its battery supply chain.
LGES began LFP production at its Michigan site in May and has indicated it may convert some domestic EV battery lines to serve energy storage demand in response to slower electric vehicle sales. Analysts say LGES enjoys a first-mover advantage in the U.S. LFP market, as other established Asian battery makers have yet to launch large-scale American production.
Tesla’s energy storage and generation segment contributes slightly more than 10 percent of its revenue and remains a bright spot for the company. CEO Elon Musk has highlighted the rapid growth of battery demand amid tariff and supply chain challenges. Tesla also plans to open its first in-house LFP cell plant in Nevada by year’s end, though it will likely cover only a fraction of the company’s requirements.
Source: Reuters
