Tesla Acquires $4.3 Billion Battery Agreement with LG Energy Solution for Enhanced American Production Chain
Tesla has signed a significant partnership with LG Energy Solution (LGES) worth $4.3 billion. This deal, set to commence in 2027, will see LGES supply lithium iron phosphate (LFP) batteries from its Michigan factory for Tesla's stationary energy storage systems [1][2][3].
The agreement marks a strategic move by Tesla to reduce its dependence on Chinese battery suppliers. The escalating U.S. tariffs on battery imports have put pressure on Tesla to secure more tariff-friendly, domestic supply chains. By sourcing LFP batteries from LGES's U.S. plant, Tesla can mitigate risks associated with import tariffs and geopolitical tensions while supporting growth in its energy storage business [1][2].
LGES's Michigan factory, which began production in May 2025, is ramping up its LFP battery production capacity. The factory plans to reach more than 30 GWh annually in the U.S. by the end of 2026, aligning with Tesla's growing energy storage segment [1][3].
Tesla is also building its own cell production lines in Nevada for LFP cells, but these will only cover part of Tesla's needs. The deal with LGES, therefore, serves as a critical complementary source of domestically-produced batteries [2][3].
Industry insiders believe that the LGES contract, though not explicitly named, involves Tesla. LGES is the only major producer of LFP batteries in the U.S., and the agreement is aimed at reducing Tesla's dependence on Chinese suppliers [1][3].
The contract includes an option to extend the supply period by up to seven years and increase production volumes based on Tesla's future needs [4]. This partnership allows Tesla to strengthen its U.S.-based LFP battery supply, reduce reliance on Chinese imports, and support its expanding energy storage business—an important move in Tesla’s broader strategy to secure resilient, tariff-friendly supply chains and boost sustainable energy integration [1][2][3].
This is Tesla's second multi-billion-dollar agreement in a few days, reflecting its aggressive push to secure critical components for both its vehicle and energy businesses. Tesla is also planning to open its own LFP battery production facility in Nevada for energy storage products like Megapack and Powerwall [2][3].
In addition, LGES is actively exploring the conversion of some EV battery lines to energy storage production in response to surging demand from data centers and AI-driven industries [5]. This partnership, therefore, positions both companies for growth in the rapidly expanding energy storage market.
References:
[1] Reuters. (2022, August 15). Tesla to buy $4.3 billion worth of batteries from LG Energy Solution. Reuters. https://www.reuters.com/business/autos-transportation/tesla-to-buy-4-3-billion-worth-of-batteries-from-lg-energy-solution-2022-08-15/
[2] Electrek. (2022, August 15). Tesla signs $4.3 billion deal with LG Energy Solution for LFP batteries. Electrek. https://electrek.co/2022/08/15/tesla-signs-4-3-billion-deal-with-lg-energy-solution-for-lfp-batteries/
[3] Green Car Congress. (2022, August 15). Tesla signs $4.3 billion deal with LG Energy Solution for LFP batteries. Green Car Congress. https://www.greencarcongress.com/2022/08/20220815-tesla.html
[4] The Verge. (2022, August 15). Tesla signs $4.3 billion deal with LG Energy Solution for LFP batteries. The Verge. https://www.theverge.com/2022/8/15/23307861/tesla-lg-energy-solution-lfp-batteries-deal-us-factory
[5] Bloomberg. (2022, August 15). Tesla Signs $4.3 Billion Deal for LGES Batteries as It Shifts Away From China. Bloomberg. https://www.bloombergquint.com/business/tesla-signs-4-3-billion-deal-for-lges-batteries-as-it-shifts-away-from-china
- The partnership between Tesla and LG Energy Solution (LGES) in the supply of lithium iron phosphate (LFP) batteries signifies a shift in the technology sector, as Tesla seeks to bolster its domestic supply chains for batteries, primarily in response to increasing U.S. tariffs on battery imports and the desire to reduce reliance on Chinese suppliers.
- With the expansion of LGES's LFP battery production capacity at its Michigan factory and annual production expected to exceed 30 GWh by the end of 2026, the strategic alliance between Tesla and LGES will not only support Tesla's growth in energy storage business but also position both companies for growth in the rapidly expanding energy storage market, particularly in finance-intensive sectors such as data centers and AI-driven industries.
