Tesla signs $4.3 billion battery supply pact with LG Energy

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(Bloomberg) — Tesla Inc. agreed to buy $4.3 billion worth of US-built batteries from LG Energy Solution Ltd., a person familiar with the matter said, in a deal that should eventually boost the carmaker’s slowing energy storage business.

LG Energy announced in a regulatory filing Wednesday that it had secured a 5.9 trillion won contract to supply lithium iron phosphate, or LFP, batteries overseas over three years starting August 2027. Tesla is the customer in the deal, the person said Wednesday, speaking on condition of anonymity as the information isn’t yet public.

LG Energy declined to comment beyond the filing, citing a confidentiality agreement. Tesla didn’t immediately respond to a request for comment.

Tesla’s energy business was steadily growing prior to President Donald Trump raising tariffs on US battery imports earlier this year. The manufacturer is particularly reliant on LFP cells from China for products including Megapack storage units designed for utilities and large-scale commercial projects.

Last week, Tesla reported its first year-over-year decline in energy storage revenue in more than three years.

LG Energy’s stock rose 0.3% in Seoul, while shares in Tesla’s leading battery supplier, Contemporary Amperex Technology Co. Ltd., slumped 7.7% in Hong Kong. That’s the steepest one-day drop since CATL’s secondary listing in May.

Tesla shares traded up 0.4% as of 7:30 a.m. in New York, before the start of regular trading.

Tesla warned in April that tariffs would have an outsize impact on the energy business, citing its reliance on LFP cells sourced from China. Chief Financial Officer Vaibhav Taneja said during the company’s first-quarter earnings call that while the company was looking to manufacture LFP batteries locally in the US, the equipment it was commissioning can only service a fraction of the total installed capacity at its Megapack factory in Lathrop, California.

“We’ve also been working on securing additional supply chain from non-China-based suppliers,” Taneja said. “But it will take time.”

LG Energy said in the filing that its contact included options to extend the supply period by up to seven years and boost volumes based on consultations with the customer. Reuters was first to report earlier Wednesday that the pact was with Tesla.

South Korean battery makers have been racing to produce more LFP batteries to better compete with low-cost Chinese rivals. LG Energy started LFP production at its Michigan factory in May and is planning to add more output at its joint plant with General Motors Co. in Tennessee.

The deal is the second in a matter of days between Tesla and a major South Korean manufacturer, following a $16.5 billion pact with Samsung Electronics Co. for artificial intelligence semiconductors announced earlier this week.

The 22.8 trillion won chipmaking agreement will run through the end of 2033. The plan is for Samsung’s upcoming plant in Taylor, Texas, to produce Tesla’s next-generation AI6 chip, Chief Executive Officer Elon Musk said on X, confirming a Bloomberg News report.