LG Energy Solution landed a 5.9 trillion won ($4.3 billion) contract to supply lithium iron phosphate batteries to Tesla, according to industry sources, capitalizing on Washington’s aggressive trade war against Chinese manufacturers.
The three-year deal, starting August 2027, will see LG Energy supply batteries from its Michigan facility to Tesla’s energy storage systems, representing about 23 percent of the Korean company’s 2024 revenue. LG Energy declined to identify Tesla as the customer, citing confidentiality obligations.
The contract highlights how U.S. tariffs have fundamentally altered battery supply chains. Chinese lithium-ion batteries now face tariffs of 58 percent for electric vehicles and 41 percent for energy storage systems, with rates potentially reaching 82 percent by 2026. These punitive duties have made Chinese suppliers like CATL, previously Tesla’s main LFP provider, prohibitively expensive.
LG Energy remains the only major producer of LFP batteries in the U.S., giving it significant pricing power as competitors scramble to establish American operations. Tesla’s energy business accounts for just over 10 percent of revenue but has shown strong growth despite supply chain challenges.
The deal underscores how trade policy has created winners and losers in the clean energy transition, with Korean manufacturers benefiting from China’s exclusion from key markets.
