Tesla secures lithium-iron-phosphate battery cells from LG’s Michigan plant in the US to power its storage units and to reduce exposure to China.
Tesla has signed a $4.3 billion agreement with LG Energy Solution to source lithium-iron-phosphate (LFP) batteries from a Michigan-based facility in the US. The deal is set to begin production in 2027 and will run through 2030, with an option to extend for an additional seven years.
This long-term contract marks one of Tesla’s most significant energy storage supply moves and reflects a larger strategy to localise its battery sourcing. It will support Tesla’s growing stationary storage products, including the Powerwall and Megapack systems, which are essential for home and grid-scale energy storage.
With rising geopolitical tensions and new US tariffs on Chinese battery components, Tesla is working to reduce its exposure to foreign supply chains, particularly from China. The company is actively restructuring its sourcing to align with national policies that favour domestic manufacturing and energy independence.
The partnership also offers LG a significant foothold in the North American energy market. The South Korean battery giant began LFP cell production at its Michigan plant earlier this year, and this contract is expected to become a cornerstone of its US operations.
LFP batteries are less energy-dense than other chemistries but offer improved safety, longevity, and cost-effectiveness. These attributes make them particularly well-suited for stationary storage, where durability and reliability matter more than compact design.
The deal is aligned with incentives introduced under the Inflation Reduction Act, which encourages clean tech manufacturing within the United States. As demand for backup power and grid stability grows, this agreement positions both companies to capitalise on an expanding energy storage market.
By shifting to a US-based supplier, Tesla aims to enhance product resilience, support American industry, and remain competitive amid global battery supply challenges.
