Tesla has secured a $4.3 billion agreement with South Korea’s LG Energy Solution (LGES) to supply lithium iron phosphate (LFP) batteries for its energy storage systems. The deal, which was outlined in a filing with the Korea Exchange on Wednesday, will run from August 2027 through July 2030, highlights Tesla’s strategy to reduce dependence on Chinese suppliers amid escalating U.S. tariffs on battery imports.
The LFP batteries will be produced at LGES’s Michigan facility. The contract, which does not explicitly name Tesla but is widely believed by industry insiders to involve the company, also includes an option to extend the supply period by up to seven years and increase production volumes based on Tesla’s future needs.
This is Tesla’s second multi-billion-dollar agreement in just a few days, following a recently announced $16.5 billion partnership with Samsung to manufacture its next-generation AI6 chips at Samsung’s Texas fab. The two deals reflect Tesla’s aggressive push to secure critical components for both its vehicle and energy businesses while strengthening its domestic supply chain.
Reducing Dependence on China
Tesla has previously highlighted how U.S. tariffs have disproportionately impacted Tesla’s energy segment due to its heavy reliance on China-sourced LFP batteries. By collaborating with LGES, Tesla aims to shift its supply chain toward non-China-based manufacturers, ensuring compliance with U.S. trade policies while reducing logistical risks.
LGES is currently the only major producer of LFP batteries in the U.S. The company began LFP battery production at its Michigan plant earlier this year and 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.
Tesla is also close to opening their own LFP battery production facility in Nevada, however those battery cells will only be for the company’s energy storage products such as Megapack and Powerwall.
