Tesla Signs $4.3 Billion Battery Deal with LG Energy Solution, Reducing Reliance on Chinese Imports

Exclusive: Tesla signs $4.3 billion LGES battery deal, source says, reducing China reliance

SEOUL, July 30 (Reuters) - South Korea's LG Energy Solution (LGES) (373220.KS), opens new tab has signed a $4.3 billion deal to supply Tesla (TSLA.O), opens new tab with energy storage system batteries, said a person familiar with the matter, as the U.S. company looks to reduce reliance on Chinese imports due to tariffs. The lithium iron phosphate (LFP) batteries will be supplied from LGES's U.S. factory in Michigan, the person said on condition of anonymity because the details were not public. LGES announced earlier on Wednesday that it had signed a $4.3 billion contract to supply LFP batteries over three years globally, without identifying the customer or saying if they would be used in vehicles or energy storage systems. The South Korean company said last week it would try to offset sluggish electric vehicle demand by increasing sales of storage batteries thanks to a global surge in demand for power driven by data centres to train artificial intelligence. "In accordance with our agreement, we are unable to disclose the customer's identity due to confidentiality obligations," LGES told Reuters. Tesla did not immediately respond to a request for comment. Tesla Chief Financial Officer Vaibhav Taneja said in April that U.S. tariffs had an "outsized" impact on its energy business, since it sources LFP batteries from China. "We will also be working on securing additional supply chain from non-China-based suppliers, but it will take time," he said. Tesla this week also announced a $16.5 billion deal to buy chips from Samsung Electronics' (005930.KS), opens new tab factory in Texas as South Korean companies expand their U.S. presence to meet local demand. Three South Korean cabinet-level officials met U.S. Commerce Secretary Howard Lutnick in Washington in a push to close a trade deal ahead of an August 1 deadline for 25% tariffs on U.S. imports from South Korea to kick in, Seoul said on Wednesday. US PRODUCTION LGES is one of the few U.S. producers of LFP batteries, a battery chemistry long dominated by Chinese rivals that have little presence in the U.S. market. It started production of LFP batteries at its Michigan factory in May. The company said it was considering converting some electric vehicle battery production lines in the United States to cater to energy storage systems in response to slowing EV demand. LGES said the contract would last from August 2027 to July 2030 and included an option to extend the deal period by up to seven years and to increase supply volumes depending on discussions with its customer. "Other players, including South Korean firms like Samsung SDI and SK On, have yet to enter the U.S. LFP market, allowing LGES to enjoy a first-mover advantage," said Cho Hyun-ryul, a senior analyst at Samsung Securities. "While rivals have announced plans, LGES remains the only one actively producing at scale." Tesla's energy storage and generation business accounts for just over 10% of its revenue but it has been a bright spot for the company as it struggles with slowing car sales and upcoming cuts to U.S. government support for EVs. "Energy is growing really well despite headwinds from tariffs and various supply chain challenges," Tesla CEO Elon Musk said on an earnings call last week. "I think not that many people appreciate just how gigantic the scale of battery demand is." Tesla has said its first LFP cell manufacturing facility will be online by the end of the year, but the in-house factory in Nevada will likely account for a small portion of its demand. Reporting by Heekyong Yang and Hyunjoo Jin; Editing by Jamie Freed Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Energy * Energy Storage * ADAS, AV & Safety * EV Battery * Sustainable & EV Supply Chain

Tesla signs multi-billion dollar battery deal with LG

Tesla's energy business just got a $4.3 billion jolt from South Korea. The company has reportedly signed a three-year contract with LG Energy Solution to source U.S.-made lithium iron phosphate (LFP) batteries for its energy storage systems, a pivot that, for Tesla, doubles as both a supply chain strategy and a tariff workaround. LG disclosed the $4.3 billion contract on Wednesday without naming Tesla, but sources confirmed to Reuters that the EV-maker was the buyer. LG told Reuters, "In accordance with our agreement, we are unable to disclose the customer's identity due to confidentiality obligations." According to LG's earlier regulatory filing, the batteries will be manufactured in Michigan and delivered between August 2027 and July 2030, with options to extend the deal through 2034 and increase volume. Tesla's stock rose on the news. Tesla's energy storage arm, which posted $2.8 billion in second-quarter revenue earlier this month, is gradually becoming a key pillar of growth -- though the business disappointed compared with its first-quarter sales. But the company's dependence on China, where it has traditionally sourced the majority of the cells for its Powerwall and Megapack systems (largely from CATL), is getting expensive. LFP batteries imported from China are, for now, reportedly subject to a 40.9% tariff, which is expected to jump to 58.4% next year. In Tesla's first-quarter earnings call, Chief Financial Officer Vaibhav Taneja said tariffs are hitting Tesla's energy division especially hard, prompting the company to try to secure more U.S.-based capacity. "The impact of tariffs on the energy business will be outsized since we source LFP battery cells from China," Taneja said. "We are in the process of commissioning equipment for the local manufacturing of LFP battery cells in the U.S.; however, the equipment which we have can only service a fraction of our total installed capacity." Tesla is building an LFP cell facility in Nevada that is slated to come online later this year, but the company has acknowledged that the site will only meet a fraction of expected demand -- especially as AI-fueled data center growth drives energy storage system (ESS) orders into overdrive. The LG supply agreement could cover around 50 gigawatt-hours of battery capacity. LG's Michigan plant, which began producing LFP cells in May, gives it a rare advantage in the U.S. battery landscape, largely because competitors such as Samsung SDI and SK On are still scaling up. The Tesla deal represents nearly 25% of LG's annual revenue, according to regulatory filings, and adds the EV-maker to a growing list of major ESS clients -- including Delta Electronics, Excelsior Energy Capital, Terra-Gen, and Hanwha Qcells. LG has even floated the idea of converting EV battery lines to meet soaring demand for stationary storage, just as carmakers such as GM, Ford, and even Tesla slow their EV expansion plans. The LG pact also follows another major South Korean tie-up for Tesla: CEO Elon Musk confirmed a $16.5 billion chip deal with Samsung earlier this week. The chips, built at Samsung's Texas fab, will power Tesla's next-gen AI systems, including self-driving cars, humanoid robots, and data center infrastructure. That agreement -- like the LG deal -- offers Tesla both geopolitical insulation and a head start on U.S. production, just as South Korea races to finalize a trade deal with the U.S. before President new tariffs hit on August 1. Tesla's short-term play is clear: secure U.S.-made LFP batteries at scale, sidestep tariffs, and backstop its Nevada production ramp. Longer term, the company is betting that energy storage can help offset slowing vehicle sales and waning federal EV incentives. The business accounted for just over 10% of Tesla's revenue last quarter, but it's one of the fastest-growing segments -- and one Musk says is still "underappreciated" in terms of scale. According to Global Market Insights, the U.S. energy storage market is expected to quadruple over the next decade, reaching $305 billion by 2034. Batteries could be the new oil. Tesla just signed a multibillion-dollar lease on the well.

Tesla signs US$4.3 billion LGES battery deal, source says, reducing China reliance

SEOUL -- South Korea's LG Energy Solution (LGES) has signed a US$4.3 billion deal to supply Tesla with energy storage system batteries, said a person familiar with the matter, as the U.S. company looks to reduce reliance on Chinese imports due to tariffs. The lithium iron phosphate (LFP) batteries will be supplied from LGES's U.S. factory in Michigan, the person said on condition of anonymity because the details were not public. LGES announced earlier on Wednesday that it had signed a US$4.3 billion contract to supply LFP batteries over three years globally, without identifying the customer or saying if they would be used in vehicles or energy storage systems. The South Korean company said last week it would try to offset sluggish electric vehicle demand by increasing sales of storage batteries thanks to a global surge in demand for power driven by data centers to train artificial intelligence. "In accordance with our agreement, we are unable to disclose the customer's identity due to confidentiality obligations," LGES told Reuters. Tesla did not immediately respond to a request for comment. Tesla Chief Financial Officer Vaibhav Taneja said in April that U.S. tariffs had an "outsized" impact on its energy business, since it sources LFP batteries from China. "We will also be working on securing additional supply chain from non-China-based suppliers, but it will take time," he said. Tesla this week also announced a US$16.5 billion deal to buy chips from Samsung Electronics' factory in Texas as South Korean companies expand their U.S. presence to meet local demand. Three South Korean cabinet-level officials met U.S. Commerce Secretary Howard Lutnick in Washington in a push to close a trade deal ahead of an August 1 deadline for 25 per cent tariffs on U.S. imports from South Korea to kick in, Seoul said on Wednesday. LGES is one of the few U.S. producers of LFP batteries, a battery chemistry long dominated by Chinese rivals that have little presence in the U.S. market. It started production of LFP batteries at its Michigan factory in May. The company said it was considering converting some electric vehicle battery production lines in the United States to cater to energy storage systems in response to slowing EV demand. LGES said the contract would last from August 2027 to July 2030 and included an option to extend the deal period by up to seven years and to increase supply volumes depending on discussions with its customer. "Other players, including South Korean firms like Samsung SDI and SK On, have yet to enter the U.S. LFP market, allowing LGES to enjoy a first-mover advantage," said Cho Hyun-ryul, a senior analyst at Samsung Securities. "While rivals have announced plans, LGES remains the only one actively producing at scale." Tesla's energy storage and generation business accounts for just over ten per cent of its revenue but it has been a bright spot for the company as it struggles with slowing car sales and upcoming cuts to U.S. government support for EVs. "Energy is growing really well despite headwinds from tariffs and various supply chain challenges," Tesla CEO Elon Musk said on an earnings call last week. "I think not that many people appreciate just how gigantic the scale of battery demand is." Tesla has said its first LFP cell manufacturing facility will be online by the end of the year, but the in-house factory in Nevada will likely account for a small portion of its demand. ---

LG Energy Clinches $4.3 Billion Battery Deal With Tesla

South Korean battery maker LG Energy Solution has secured a multibillion-dollar deal to supply Tesla with lithium iron phosphate batteries for three years. LG Energy Solution on Wednesday said it signed a $4.3 billion contract to supply LFP batteries. The deal will run from August 2027 to July 2030 and includes an option to increase the volume and extend the duration for up to seven years, depending on follow-up discussions, it said in a regulatory filing. LG Energy didn't identify the client due to a confidentiality agreement. A person familiar with the contract said the customer is Tesla. "Few companies, except Tesla, can afford to make such a massive, multiyear battery-supply deal," the person said, asking not to be named. LG Energy's U.S.-based factories are expected to produce LFP batteries for Tesla's energy-storage systems, the person said. The U.S. electric-vehicle maker didn't immediately respond to a request for comment. The agreement comes days after Tesla reached a $16.5 billion deal with another South Korean company, Samsung Electronics, on the supply of artificial-intelligence chips in the U.S. Tesla Chief Executive Elon Musk confirmed on X that Samsung's new foundry plant in Texas will be dedicated to making the company's next-generation AI6 chip. The AI6 chip is intended to be used in humanoid robots, self-driving cars and AI data centers. The flurry of deals involving South Korean companies comes as Seoul, facing President Trump's 25% blanket tariffs, is rushing to reach a trade agreement with Washington before the Aug. 1 deadline. South Korea has hinted at plans for bigger investments in the U.S. in exchange for lower tariffs. The LG Energy-Tesla contract also comes as the South Korean battery maker looks to counter the slowdown in demand for electric vehicles after years of huge investments based on overly optimistic forecasts. It is now shifting its attention to the growing demand for energy-storage systems or batteries for utilities and massive data centers that train AI models and operate AI applications. China has dominated the low-cost LFP-based energy storage battery market globally, but competing South Korean battery makers such as LG Energy are seeking to catch up and take on Chinese rivals in the U.S. as the Trump administration is ramping up its trade and regulatory curbs on Beijing. LG Energy said in its latest quarterly earnings call earlier this month that it started its first ESS production in the U.S. during the April-June quarter. The company said it aims to boost its annual production capacity for ESS batteries to 17 gigawatt-hours by the end of 2025 and to over 30 GWh by the end of 2026 in North America. Shares of LG Energy rose 0.6% after the deal's announcement. The benchmark Kospi was 1.1% higher.