South Korean battery manufacturer LG Energy Solution (LGES) has secured a major US$4.3 billion contract to supply lithium iron phosphate (LFP) batteries over three years, from August 2027 to July 2030, with an option to extend the deal for up to seven more years.
Industry sources and regulatory filings indicate that the customer is Tesla, the leading American electric vehicle and energy storage company, although LGES has not officially confirmed the counterparty due to confidentiality agreements.
The LFP batteries covered by this contract will be produced at LGES’s manufacturing facility in Michigan, USA, underscoring a strategic push towards onshoring supply to reduce reliance on Chinese battery imports amid ongoing tariffs.
Tesla CFO Vaibhav Taneja previously noted the outsized impact of US tariffs on its energy business, highlighting the importance of securing local supply chains.
The agreement is notable not only for its size — valued at US$4.3 billion, which approximates 23 per cent of LGES’s previous annual sales revenue — but also for its alignment with US industrial policies such as the Inflation Reduction Act (IRA).
This legislation incentivises local production of critical technologies like batteries, offering investment tax credits that LGES is actively leveraging by producing LFP pouch cells in Michigan.
This strategic localisation enhances LGES’s competitiveness in both the electric vehicle and energy storage system (ESS) markets.
While the contract specifies global supply of batteries, it does not clarify if the batteries will be used solely in electric vehicles or more prominently for Tesla’s growing energy storage systems.
LGES is known to supply both types of clients, including Tesla and General Motors.
The company is also expanding its LFP production footprint with new facilities, including one in Arizona, emphasising its commitment to meeting surging demand driven by EV adoption and increasing energy needs from data centers powering artificial intelligence applications.
LGES has cautioned investors that contract details such as volume and duration may change and warned of the possibility of contract modifications or termination, reflecting typical risks in such large-scale agreements.
This US$4.3 billion contract, alongside Tesla’s recent US$16.5 billion chip supply deal with Samsung Electronics, signals deepening supply chain collaborations between major South Korean technology firms and Tesla.
It is a pivotal development contributing to US goals for energy independence and EV supply chain resilience through strategic international partnerships and domestic manufacturing.
