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LG Energy Solution Signs $4.3 Billion LFP Battery Deal with Tesla for Energy Storage

South Korea's LG Energy Solution has entered a $4.3 billion agreement to supply lithium iron phosphate (LFP) batteries to Tesla Inc. for its energy storage systems. The deal, set to run from August 2027 to July 2030 with an option to extend for seven more years, highlights Tesla's efforts to diversify battery supply chains and reduce dependency on Chinese imports amid rising U.S. tariffs.

The batteries will be manufactured at LG’s plant in Lansing, Michigan, which began LFP cell production in May 2025. This makes LG one of the first U.S.-based producers of LFP batteries, a segment long dominated by Chinese companies. The deal also supports LG’s strategic pivot from electric vehicle batteries to energy storage solutions, driven by growing demand from AI-powered data centers and other sectors.

Tesla, which declined to confirm the buyer or application of the batteries, is facing mounting challenges from U.S. tariffs targeting Chinese energy components. Its Chief Financial Officer Vaibhav Taneja emphasized in April the adverse impact of these tariffs on Tesla’s energy division, prompting the company to secure alternative suppliers like LG.

This deal follows Tesla’s $16.5 billion semiconductor sourcing agreement with Samsung Electronics and reflects its deeper engagement with South Korean firms amid shifting trade dynamics. Analysts note that LG’s early entry into U.S.-based LFP production offers a strategic advantage, with competitors like Samsung SDI and SK On yet to enter the U.S. LFP market. Tesla also plans to begin limited LFP cell production at its Nevada plant by the end of 2025, though it is expected to fulfill only part of its growing storage needs.