Tesla signs $4.3 billion battery deal with LGES, aims to reduce China reliance

Tesla has signed a whopping $4.3 billion battery deal with LG Energy Solution (LGES). The US electric vehicle major aims to reduce its reliance on China for key components like the battery pack. The deal with LGES comes as part of that strategy. The South Korean company has a supply contract with Tesla for three years, between August 2027 and July 2030. However, the agreement includes an option to extend the supply period by up to seven years and boost volumes based on the demand from the customer. Under this agreement, LGES will provide Tesla with lithium iron phosphate (LFP) batteries for energy storage systems from the US factory.

Reuters has reported that Tesla has been looking to reduce reliance on Chinese suppliers amid the ongoing tariff war and policy headwinds. As a result, Tesla aims to reduce its imports from China. The report also stated that LFP batteries will be supplied from LGES's US factory in Michigan.

LGES said earlier on Wednesday that it had signed a $4.3 billion contract to supply LFP batteries over three years globally, without identifying the customer. However, the announcement by the company, whose major customers include Tesla and General Motors, did not say whether the LFP batteries would be used in vehicles or energy storage systems.

Tesla currently imports LFP batteries from China, but higher tariffs have made it increasingly difficult for US companies to import LFP batteries from China. Tesla's Chief Financial Officer (CFO), Vaibhav Taneja, said in April 2025 that the EV company was looking to secure non-Chinese battery suppliers for its energy storage business due to tariffs, but it would take time.

The LFP deal comes amid a scramble by countries and companies globally to strike tariff agreements with Washington, and after South Korea's Samsung Electronics and Tesla this week announced a $16.5 billion chip supply deal.

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