US government confirms Tesla and LG Energy Solution's $4.3 billion battery deal

The U.S. government on Monday said electric vehicle maker Tesla TSLA.O and South Korea's LG Energy Solution 373220.KS had signed a supply agreement to build a $4.3 billion lithium iron phosphate (LFP) prismatic battery cell manufacturing facility in Lansing, Michigan, with an expected productionlaunch in 2027.

"American-made cells will power Tesla's Megapack 3 energy storage systems produced in Houston, creating a robust domestic battery supply chain," the U.S. Department of the Interior said in a statement on Monday.

The agreement was part of a broader statement on deals highlighted by President Donald Trump's administration from the Indo-Pacific Energy Security Summit.

A source told Reuters in July that LG Energy Solution had signed a $4.3 billion deal to supply Tesla with energy storage system batteries as the U.S. company looked to reduce its reliance on Chinese imports due to tariffs.

At the time, the South Korean company said it had signed a $4.3 billion contract to supply LFP batteries over three years globally, without identifying the customer or saying if they would be used in vehicles or energy-storage systems.

LG Energy Solution is one of the few producers of LFP batteries in the U.S. The LFP battery chemistry has long been dominated by Chinese rivals that have little presence in the U.S. market.

-Kanishka Singh/Reuters