Inside the LG–Tesla Deal Reshaping US Battery Supply

LG Energy Solution signs large US supply contract, widely linked to Tesla, as demand for grid-scale storage grows

2 Aug 2025

LG Energy Solution has signed a long-term supply deal for lithium iron phosphate batteries made in the United States, a contract that industry sources widely link to Tesla. Valued at about $4.3 billion, the agreement reflects how quickly grid storage is moving from niche to necessity.

According to public disclosures, LG Energy Solution will supply LFP cells produced at its Michigan facility. Deliveries are set to begin in 2027 and run through mid-2030, with an option to expand volumes. While the company has not named the customer, citing confidentiality, multiple reports identify Tesla as the buyer.

Notably, the batteries are destined for energy storage systems rather than electric vehicles. That detail matters. Utilities and commercial developers are racing to add storage capacity as renewable power grows and grids face new stability challenges. LFP chemistry, once overshadowed by other lithium-ion options, has become a favored choice for stationary storage thanks to its cost advantages and safety record.

The timing also reflects a broader policy push. Federal incentives have encouraged manufacturers to bring battery production home, reducing reliance on imported materials and overseas factories. While one contract will not solve supply chain bottlenecks overnight, analysts see this deal as evidence that domestic production is gaining real traction.

Still, the picture is not one-dimensional. Other lithium chemistries and long-duration storage technologies are advancing alongside LFP, each targeting different use cases. For now, the LG Energy Solution agreement is less about picking winners and more about showing where immediate demand is flowing.

Challenges remain. Scaling upstream materials in the US, navigating trade rules, and coordinating long-term procurement all pose risks. Yet many companies view these pressures as reasons to invest rather than retreat.

As grid storage demand accelerates, the LG Energy Solution deal widely tied to Tesla offers a clear takeaway. Reliable, US-made battery supply is no longer a future ambition. It is becoming a core requirement of the country’s energy strategy.