Tesla signs $4.3 billion LGES battery deal - Source

Tesla has signed a $4.3 billion battery supply deal with South Korea's LG Energy Solution (LGES) to source lithium iron phosphate (LFP) batteries for its energy storage systems. This agreement, running from August 2027 to July 2030 with a possible extension of up to seven years, reflects Tesla's strategy to reduce reliance on Chinese imports amid rising U.S. tariffs affecting Chinese battery imports.

The LFP batteries will be produced at LGES’s Michigan factory, marking a significant shift away from Tesla's previous dependence on Chinese suppliers for these batteries.

LGES is one of the few U.S.-based producers of LFP batteries, providing Tesla a strategic advantage amid global supply chain and tariff challenges.

The $4.3 billion deal covers a three-year supply period for LFP batteries primarily for energy storage systems. Tesla aims to mitigate the impact of U.S. tariffs on Chinese battery imports by sourcing from LGES in the U.S.

LGES began LFP battery production in Michigan in May and plans to expand production further in the U.S. The contract allows for increases in supply volume and potential extension, subject to negotiation.

Tesla CFO acknowledged earlier that securing non-China-based battery supply will take time but is necessary due to tariffs.

LGES’s position as a leading LFP battery manufacturer in the U.S. gives Tesla a first-mover advantage in this segment.

This deal is part of a broader trend of Tesla diversifying its supply base outside China, particularly in energy storage, where battery demand is growing despite slowing electric vehicle sales. The move also aligns with U.S. manufacturing priorities and concerns over tariff and policy uncertainties related to Chinese imports.

This $4.3 billion LGES deal is a strategic step by Tesla to reduce its dependency on Chinese battery suppliers, lower tariff risks, and strengthen its energy storage system battery supply through domestic production in the United States.

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