Tesla TSLA may be moving towards American battery autonomy following a $4.3 billion agreement with LG Energy Solution.
LG Energy Solution Secures $4.3 Billion Deal with Tesla for U.S.-Made Lithium Iron Phosphate Batteries
In a significant move, LG Energy Solution (LGES) has secured a deal worth $4.3 billion with Tesla to supply lithium iron phosphate (LFP) batteries for energy storage systems (ESS). The deal, which spans from August 2027 through July 2030 with an option to extend for up to seven additional years, will see LGES's Michigan factory producing the batteries.
This agreement marks a strategic partnership aimed at scaling U.S.-based production of LFP batteries for stationary storage, reducing supply risks, and supporting Tesla’s energy storage expansion. The batteries will be used exclusively in Tesla’s stationary energy storage solutions such as Megapack, rather than for electric vehicles, supporting Tesla’s growing energy division.
The deal aligns with LG’s push to increase production of cost-effective LFP cells optimized for energy storage. LFP chemistry is cost-competitive and increasingly favored for grid-scale storage, playing a critical role amid renewable integration for grid stabilization.
This partnership positions both companies to locally support American energy storage ambitions and reduce tariff risks against imports from China. The deal may pressure competitors like CATL, whose stock dropped after the announcement, reflecting competitive shifts in global LFP supply chains and solidifying Tesla’s energy storage ambitions outside automotive applications.
The global solid-state battery market is expected to grow from $0.26 billion in 2025 to $1.77 billion by 2031, with a projected CAGR of 37.5%, according to MarketsandMarkets. Key players in this market include U.S. companies like Solid Power, QuantumScape, Sakuu Corporation, and Excellatron, who are spearheading innovation in solid-state battery technologies. Mercedes-Benz and Factorial Energy are also collaborating on a technology that could offer electric vehicles over 600 miles of range on a single charge using solid-state batteries.
Primary solid-state batteries, commonly used in smart packaging, RFID tags, and medical patches, will likely dominate the market in the short term. However, the energy segment, despite experiencing a 7% year-over-year drop due to pricing pressure and supply chain challenges, is expected to witness a surge in demand fueled by the rapid expansion of AI data centers and renewable energy installations.
LGES is also working on creating a closed-loop battery ecosystem, actively exploring ways to reuse used EV batteries for energy storage and recycle production waste. The company is shifting gears toward energy storage, betting on this surge in demand.
In the second quarter of 2025, LGES posted solid earnings, with an operating profit of KRW 492.2 billion and an 8.8% margin. Despite this, the company anticipates a short-term slowdown in EV demand due to new tariffs and cost pressures on automakers, but remains optimistic about mid- to long-term growth driven by advances in autonomous driving and energy storage.
The Michigan plant began operations in May, and the Arizona plant is set to further strengthen LGES’s U.S. presence. With operational plants in Michigan and an upcoming facility in Arizona, LGES is well-positioned to meet growing U.S. demand while staying aligned with evolving trade rules.
[1] Tesla secures LG Energy Solution deal for U.S.-made LFP batteries
[2] Tesla and LG Energy Solution Strike Deal for U.S.-Made Batteries
[3] Tesla and LG Energy Solution announce deal for U.S.-made batteries
[4] Tesla and LG Energy Solution form partnership for U.S.-made batteries
[5] Tesla and LG Energy Solution Announce Major Battery Deal
[6] LG Energy Solution seals $4.3 billion deal with Tesla for U.S.-made LFP batteries, signifying a strategic investment in clean energy sector.
[7] With this partnership, Tesla and LG Energy Solution are demonstrating their commitment to regulation and policy in the renewable-energy industry.
[8] The financial implications of this deal are significant, as investing in LG Energy Solution will contribute to the growth of the business and personal-finance portfolios, particularly in the energy and technology sectors.
[9] The growth in the solid-state battery market, boosted by this deal, presents opportunities for wealth-management businesses to strategize and make smart investments in the renewable-energy industry.
[10] This deal marks a pivotal moment in the clean energy industry, as it supports the development of regulation and technology for the provision of clean, renewable-energy solutions.
