Tesla Secures $4.3B Battery Deal With LGES Over CATL
▼ Summary
– Tesla has signed a deal with LG Energy Solutions (LGES) to supply lithium iron phosphate (LFP) battery cells, adding a new supplier to its existing partnerships with Panasonic and CATL.
– The $4.3 billion contract will run from August 2024 to at least July 2030, with potential extensions if needed.
– The LFP cells will likely be used in Tesla’s energy storage products rather than EVs, as demand for energy storage grows amid weak EV sales in North America.
– The deal reduces Tesla’s reliance on Chinese suppliers like CATL, as LGES will produce the cells in Michigan, avoiding Trump-era tariffs on Chinese-made batteries.
– Despite Elon Musk’s optimism about the energy storage market, its financial contribution to Tesla remains small and even declined in the last quarter.
Tesla has inked a massive $4.3 billion battery supply agreement with LG Energy Solutions, marking a strategic shift in its sourcing strategy. While the electric vehicle pioneer maintains significant vertical integration, battery cells remain one area where it relies heavily on external partners. Historically, Panasonic has supplied cells for many Tesla models, while Chinese giant CATL provided lithium iron phosphate (LFP) batteries, a cost-effective and durable alternative. This new deal with LGES introduces another key supplier into Tesla’s ecosystem.
Reports from South Korean media indicate the contract spans from August next year through July 2030, with potential extensions if needed. The LFP batteries from LGES are expected to power Tesla’s energy storage systems rather than its vehicles, reflecting a pivot toward stationary storage solutions amid softening EV demand in North America.
Another critical aspect of this agreement is geopolitical diversification. Unlike CATL’s China-made cells, LGES will manufacture these batteries in Michigan, avoiding tariffs imposed during the Trump administration. This move reduces Tesla’s exposure to trade tensions while supporting domestic production.
Despite Elon Musk’s bullish outlook on energy storage growth, the segment’s financial impact on Tesla remains modest. Recent quarterly results even showed a decline in revenue from this division. Still, securing a stable, tariff-free supply of LFP batteries could strengthen Tesla’s position in the evolving energy storage market.
(Source: Ars Technica)
