LG Energy inks $4.3 bn battery deal amid Tesla’s push to cut China reliance: Report
South Korea’s LG Energy Solution (LGES) has entered into a $4.3 billion agreement to supply Tesla with batteries for energy storage systems, according to a person with knowledge of the matter, Reuters reported.
The move aligns with the U.S. firm's strategy to reduce dependence on Chinese imports in the wake of escalating tariffs.
The batteries—based on lithium iron phosphate (LFP) chemistry—will be produced at LGES’s manufacturing facility in Michigan, the person said, requesting anonymity as the information is not yet public.
Earlier on Wednesday, LGES announced it had signed a $4.3 billion contract to provide LFP batteries globally over a three-year period, though it did not name the customer.
The company, which counts Tesla and General Motors among its major clients, also did not specify whether the batteries were intended for electric vehicles or stationary energy storage.
“In accordance with our agreement, we are unable to disclose the customer’s identity due to confidentiality obligations,” LGES told Reuters.
Tesla has not yet responded to a request for comment.
Currently, Tesla sources its LFP batteries from China.
“But higher tariffs have made it increasingly difficult for U.S. companies to import LFP batteries from China,” said Cho Hyun-ryul, senior analyst at Samsung Securities.
In April, Tesla’s CFO Vaibhav Taneja said the automaker was seeking alternative suppliers outside China for its energy storage business but acknowledged that the transition would take time.
This battery deal surfaces as global players scramble to navigate U.S. trade policies and secure supply chain agreements.
It also follows the recent announcement of a $16.5 billion chip supply deal between Tesla and Samsung Electronics.
LGES is among the few companies manufacturing LFP batteries in the United States—a sector still largely dominated by Chinese firms.
The Michigan facility began LFP battery production in May, and the company is weighing the possibility of repurposing some EV battery lines to focus on energy storage, given the cooling demand for electric vehicles.
According to LGES, the new contract runs from August 2027 to July 2030, with provisions to extend it by up to seven years and potentially increase supply volumes based on future discussions with the client.
Earlier this month, the company cautioned about a further decline in EV battery demand into early next year, citing tariff pressures and policy uncertainty in the U.S., even as it reported a rise in quarterly profits.
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