Tesla Commits $4.3B to LG Batteries in Strategic China Pivot

LG Energy Solution has landed a $4.3 billion contract to supply energy storage batteries to Tesla, a source familiar with the deal said, as the U.S. automaker seeks to diversify its supply chain and cut dependence on Chinese imports amid rising tariffs.

The source, speaking anonymously, said LG Energy Solution will supply LFP batteries from its Michigan plant. Earlier Wednesday, LG Energy Solution announced a $4.3 billion, three-year deal to supply LFP batteries globally, without disclosing the customer.

The company, whose major clients include Tesla and General Motors (GM.N), did not specify whether the LFP batteries would be used in vehicles or energy storage systems.

Tesla currently sources LFP batteries from China, but rising tariffs have made imports increasingly difficult for U.S.Cho Hyun-ryul, senior analyst at Samsung Securities, noted that firms face growing challenges due to tariffs.

In April, Tesla CFO, Vaibhav Taneja said the company was seeking non-Chinese battery suppliers for its energy storage business due to tariffs, though the shift would take time.

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The LFP deal comes as countries and companies race to secure tariff agreements with Washington, following this week’s $16.5 billion chip supply deal between Samsung Electronics (005930.KS) and Tesla (TSLA.O).