Tesla struck a massive $4.3 billion deal with LG Energy Solution to supply American-made batteries for its energy storage products. The agreement runs from August 2027 through July 2030 and could extend even longer. LGES will produce the batteries at its Michigan and Arizona factories.
Tesla secures $4.3 billion battery deal with LG Energy Solution for US-made energy storage products through 2030.
The deal helps Tesla avoid hefty tariffs on Chinese battery imports. These tariffs started at 25% and could jump to over 80%. Tesla previously relied on Chinese suppliers like CATL for most of its batteries. Now it’s transitioning to US production as trade tensions rise between America and China.
Tesla needs lots of batteries for its Megapacks and Powerwalls, which store energy for homes and power grids. The company’s energy division brings in more than 10% of its total revenue. In the second quarter of 2025, energy sales hit $2.8 billion, though that’s down 7% from last year due to more competition.
LGES started making LFP batteries at its Michigan plant in May 2025. The company plans to expand production in Arizona too. These LFP batteries cost less than other types, making them perfect for energy storage products. LGES is one of the few companies making these batteries in America. The company has committed to achieving carbon neutrality across its entire value chain by 2050 and converting all power use to renewable energy by 2030.
Tesla’s own battery factory in Nevada can only produce less than 10 gigawatt-hours per year. That’s not enough to meet the company’s needs of over 40 gigawatt-hours for energy storage. The Nevada plant should start limited production by the end of 2025.
The partnership comes as LGES modifies its business strategy. The company works with General Motors through a joint venture called Ultium Cells. But with electric vehicle demand slowing down, LGES is shifting some production lines to focus on energy storage batteries instead. This shift aligns with broader market dynamics where energy storage demand is outpacing electric vehicle battery needs.
CEO Elon Musk has emphasized the need to scale up battery production quickly. Energy storage demand is growing faster than vehicle sales. The new deal gives Tesla a steady supply of American-made batteries while helping LGES use its US factories more efficiently.
Both companies benefit as they adjust to changing market conditions and trade policies.