LG Energy secures $4.3 bn LFP battery deal from Tesla in shift from CATL

LG Energy Solution Ltd. on Wednesday announced a $4.3 billion deal to supply lithium iron phosphate (LFP) batteries to a foreign client, identified by industry sources as Tesla Inc., as the US electric vehicle maker seeks to reduce reliance on Chinese battery imports amid rising US tariffs.

The deal highlights Tesla's move away from its long-time supplier, China’s Contemporary Amperex Technology Co. Ltd. (CATL), the world’s largest LFP battery maker. Its domestic rival BYD Co. ranks second in the low-cost battery market.

Under the deal, LG Energy will deliver the batteries starting from August 2027 through the end of July 2030, with the contract value equivalent to about one-quarter of its 2024 sales.

The largest rechargeable battery maker in South Korea did not disclose the client’s name, citing a confidentiality agreement.

“This deal includes provisions to extend the contract period up to seven years and to increase the supply volume accordingly,” LG Energy said in a regulatory filing. “As a result, the contract's value and duration may be subject to change.”

As the Trump administration is accelerating its supply-chain decoupling from China, LG Energy is scaling up production in the US.

Industry observers said the batteries are likely to be used in Tesla’s energy storage system (ESS) devices as LG Energy’s manufacturing plants in the US, spanning Ohio, Tennessee and Michigan, are dedicated to LFP batteries optimized for ESS applications.

LG Energy is shifting toward LFP batteries, more affordable and suitable for mass-market EVs, amid a slower-than-expected market transition toward electric vehicles.

Its joint venture with Generator Motors Co., Ultium Cells LLC, is converting its production lines for high-nickel cobalt manganese (NCM) models in Tennessee into those for LFPs, which are gaining traction in the ESS market.

Their commercial production is expected to begin by late 2027.

In March, LG Energy sealed a contract with global energy management firm Delta Electronics Inc. to supply 4 gigawatt-hours’ worth of ESS batteries for residential buildings in the US in a partnership with Delta Electronics Inc., an electronics manufacturing company based in Taiwan.

Delta counts Tesla and Apple among its major clients.

During its second-quarter conference call earlier this month, LG Energy said it expects meaningful profit growth in the second half, with ESS battery sales offsetting sluggish sales of EV batteries.

The battery deal with Tesla comes after Samsung Electronics Co. clinched a $16.5 billion contract chipmaking deal with the EV maker.

Write to Dae-Young Kim and Yeonhee Kim at kdy@hankyung.com

Jennifer Nicholson-Breen edited this article.