US electric car manufacturer Tesla has signed a US$4.3 billion supply contract with LG Energy Solution, according to a Reuters report. Under the agreement, LGES will supply lithium iron phosphate batteries for Tesla’s stationary energy storage systems from its Michigan factory starting in 2027. Initially set to run for three years, the agreement includes an option to extend and increase delivery quantities. LGES declined to confirm the identity of the customer, and Tesla has not yet issued an official statement.
Through this contract, Tesla is apparently aiming to reduce its reliance on Chinese battery suppliers. U.S. tariffs on Chinese imports have reportedly impacted Tesla’s energy storage business in particular. LGES is currently one of the few suppliers producing LFP batteries in the US. Cell production in Michigan began in May 2025. According to the report, LGES is also considering repurposing existing production lines due to the current decline in demand for electric car batteries.
Tesla’s energy division recently accounted for just over ten percent of sales and is considered to be growing faster than the currently sluggish vehicle business. Tesla is setting up its own cell production facility in Nevada, but this will only cover part of its battery cell needs.
