LG Energy Solution Strikes $4.3 Billion Deal to Power Tesla’s Energy Storage Revolution

LG Energy Solution has clinched a 5.9 trillion KRW ($4.3 billion) deal to supply lithium-iron phosphate (LFP) battery cells, likely destined for Tesla’s energy storage systems. This agreement cements LG Energy Solution’s position as the sole U.S. manufacturer of these cost-effective batteries.

According to a regulatory filing on Wednesday, LG Energy Solution will provide LFP cells to a global client for three years, from August 1, 2027, to July 31, 2030, with a potential extension to 2034. This contract, representing 23% of last year’s 25.6 trillion KRW revenue, marks the company’s largest energy storage deal to date.

Industry analysts estimate the total supply at approximately 50 gigawatt-hours of cells, based on an assumed price of $85 per cell.

While LG Energy Solution declined to divulge specifics due to confidentiality agreements, industry insiders believe the company will be supplying batteries for Tesla’s energy storage products. LG Energy Solution currently produces LFP cells for energy storage systems at its Michigan facility, targeting the U.S. market. The company also plans to manufacture LFP battery products for Renault Group’s electric vehicles at its Wroclaw plant in Poland.

During Tesla’s Q1 earnings call, Travis Axelrod, head of investor relations, stated, “Tariffs will significantly impact our energy business as we source LFP battery cells from China. We’re commissioning equipment for U.S.-based LFP cell production, but our current capacity can only meet a fraction of our total demand.”

“We’re also working to secure non-Chinese suppliers, but this will take time,” Axelrod added.

In response to U.S. tariffs restricting Chinese-sourced batteries and components, Tesla has fast-tracked construction of its LFP cell plant for energy storage systems in Nevada. Recent reports suggest the facility is nearing completion.

Tesla’s strategy has involved incorporating equipment and battery designs from its Chinese partner, CATL, at the Nevada site, given their strong business relationship in the energy storage sector.

However, Tesla has acknowledged limitations in scaling up battery cell capacity to meet the booming U.S. energy storage market, driven by AI data centers and demand for reliable power solutions.

Lee Ho-geun, an automotive engineering professor at Daeduk University, commented, “Tesla may face delays in ramping up production at its Nevada plant. This potential shortfall likely led Tesla to partner with LG Energy Solution, which appears to offer competitive pricing compared to tariff-affected Chinese firms like CATL.”

Chinese-made energy storage batteries imported to the U.S. currently face a 40.9% tariff, expected to rise to 58.4% next year. Korean battery makers are pushing for U.S.-based production of energy storage cells to offset the current 10% tariff, set to increase to 25% starting Friday.

Industry experts project that Chinese LFP battery cell prices for the U.S. market will climb from $73 last year to $87 by 2026.

As of June, LG Energy Solution has secured multiple contracts exceeding 50 GWh capacity, with key U.S. clients including Delta Electronics, Excelsior Energy Capital, Terra-Gen, and Hanwha Qcells.

Market research firm Global Market Insights forecasts the U.S. energy storage market to grow at an average annual rate of 13.4%, reaching $305.5 billion by 2034, up from $78.9 billion in 2022.