Tesla Signs $4.3 Billion Battery Deal with LGES, Source Says, Reducing China Reliance

Summary

• LGES to provide Tesla with LFP batteries for energy storage systems from US factory -source
• Tesla has been looking to reduce reliance on Chinese suppliers amid tariff, policy headwinds
• LGES says supply contract to last from August 2027 to July 2030

(Reuters) – South Korea’s LG Energy Solution (LGES) has signed a $4.3 billion deal to supply Tesla with energy storage system batteries, said a person familiar with the matter, as the U.S. company looks to reduce reliance on Chinese imports due to tariffs.

The lithium iron phosphate (LFP) batteries will be supplied from LGES’s U.S. factory in Michigan, the person said on condition of anonymity because the details were not public.

LGES said earlier on Wednesday that it had signed a $4.3 billion contract to supply LFP batteries over three years globally, without identifying the customer.

The announcement by the company, whose major customers include Tesla and General Motors did not say whether the LFP batteries would be used in vehicles or energy storage systems.

“In accordance with our agreement, we are unable to disclose the customer’s identity due to confidentiality obligations,” LGES told Reuters. Tesla did not immediately respond to a request for comment.

Tesla currently imports LFP batteries from China, “but higher tariffs have made it increasingly difficult for U.S. companies to import LFP batteries from China,” said Cho Hyun-ryul, a senior analyst at Samsung Securities.

Tesla Chief Financial Officer Vaibhav Taneja said in April that the company was looking to secure non-Chinese battery suppliers for its energy storage business due to tariffs but it would take time.

The LFP deal comes amid a scramble by countries and companies globally to strike tariff agreements with Washington and after South Korea’s Samsung Electronics and Tesla this week announced a $16.5 billion chip supply deal.

US PRODUCTION

LGES is one of the few U.S. producers of LFP batteries, a battery chemistry long dominated by Chinese rivals that have little presence in the U.S. market.

It started production of LFP batteries at its Michigan factory in May. The company said it was considering converting some electric vehicle battery production lines in the United States to cater to energy storage systems in response to slowing EV demand.

LGES said the contract would last from August 2027 to July 2030 and included an option to extend the deal period by up to seven years and to increase supply volumes depending on discussions with its customer.

The South Korean company warned this month of a further slowdown in EV battery demand by early next year due to U.S. tariffs and policy uncertainties as it posted a quarterly profit jump.

Reporting by Heekyong Yang and Hyunjoo Jin; Editing by Christopher Cushing and Jamie Freed

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