Tesla to Acquire LFP Battery Cells from LGES within the United States
Tesla Secures $4.3 Billion Battery Supply Deal with LG Energy Solution
Tesla has signed a significant deal with South Korea's LG Energy Solution, worth $4.3 billion over three years, starting from August 2027. The agreement, which includes an option for extension and potential increase in supply volumes, is primarily for lithium iron phosphate (LFP) batteries to be used in Tesla's energy storage systems [1][2][3].
This deal marks a strategic move by Tesla to reduce its dependence on Chinese battery suppliers, such as Contemporary Amperex Technology Co. Ltd. (CATL), amid rising U.S. tariffs and geopolitical pressures. By partnering with LG Energy Solution to domestically source LFP cells, Tesla aims to alleviate financial strain and strengthen its domestic supply chain outside of China [1][3].
The supply deal will see LG Energy Solution providing batteries from its U.S. factory in Michigan, starting in 2027. This factory is expected to cover only a portion of Tesla's needs, as the electric vehicle company is also building its own cell production facility in Nevada [1][3].
LG Energy Solution is one of the few providers in the U.S. producing LFP batteries, with production in Michigan set to commence in May 2025 [1][3]. The deal appears to be part of Tesla's broader strategy to localize its battery supply chain within the U.S. and lessen reliance on Chinese imports, particularly for energy storage applications involving LFP chemistry [1][3].
Tesla's energy division has been performing exceptionally well, contributing over ten percent of its revenue. The division is seen as a growth driver, outperforming the currently struggling vehicle business [1][3]. The U.S. tariffs on Chinese imports have particularly impacted the energy storage business, making domestic sourcing a strategic move for Tesla [1][3].
Reports suggest that the current decrease in demand for electric vehicle batteries may lead LG Energy Solution to consider repurposing existing production lines. However, the focus remains on meeting Tesla's growing demand for energy storage systems [1][3].
Tesla's energy division is set to play a crucial role in the company's future, with its energy storage systems powering homes, businesses, and grid-scale projects. The deal with LG Energy Solution is a significant step in Tesla's journey towards a more sustainable and independent energy future.
[1] Tesla signs $4.3 billion deal with LG Energy Solution for LFP batteries
[2] Tesla's Energy Division Outperforming Vehicle Business
[3] Tesla's Energy Storage Business and the U.S. Tariffs
- This deal with LG Energy Solution, a significant player in the technology industry, is part of Tesla's strategic business moves to secure a reliable finance source for its energy storage systems, particularly through the supply of lithium iron phosphate (LFP) batteries.
- Tesla's partnership with LG Energy Solution, a key player in the finance and technology sectors, aims to strengthen its domestic business operations outside of China, alleviating potential financial strains and reducing dependence on Chinese battery suppliers.
