Tesla taps LG Energy for $4.3b battery plant in US

Tesla and South Korea’s LG Energy Solution signed a supply agreement to build a US$4.3 billion lithium iron phosphate prismatic battery cell factory in Lansing, Michigan, with production expected in 2027.

American-made cells will power Tesla’s Megapack 3 energy storage systems produced in Houston.

LG had signed a US$4.3 billion deal to supply Tesla with energy storage system batteries as Tesla worked to reduce reliance on Chinese imports because of tariffs.

LG said it had a US$4.3 billion contract to supply LFP batteries over three years but did not name the customer or state whether the cells were for vehicles or energy storage.

LFP chemistry is largely dominated by Chinese producers and LG is one of the few firms producing LFP cells in the US.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

The new factory has a surprising history and powerful incentives

The Lansing, Michigan, site reworks a former LG Energy Solution and General Motors joint venture battery plant, rated at 50 GWh a year 1.
LG will reuse electrode equipment first ordered for the Ultium Cells joint venture with General Motors, cutting time and cost for Tesla-focused lithium iron phosphate (LFP) lines 2.
The Inflation Reduction Act helps drive the project since U.S.-made cells let Tesla’s commercial and residential energy buyers claim federal tax credits, lowering prices for its energy products 3.
For stationary storage, LFP often beats nickel-based batteries since it holds up across thousands of charge cycles and avoids pricey minerals such as cobalt and nickel 3.

A new U.S. battery alliance takes aim at China’s LFP dominance

The agreement puts LG Energy Solution into the fast-growing stationary energy storage business, where Chinese suppliers like CATL (a major Chinese battery manufacturer) have led 2.
Tesla also spreads risk in its supply chain after relying mainly on CATL’s prismatic batteries for Megapack energy storage systems 1.
The partnership offers a model for Western companies seeking a non-Chinese LFP supply chain, which could speed a wider shift in the battery industry 4.
Equipment vendors feel the ripple as A-PRO (a South Korean battery manufacturing equipment company) moves beyond pouch-type battery equipment into prismatic-cell systems for the production line 4.