Tesla Likely Client for LG's $4.3 Billion Lithium Battery Deal
The contract highlights LG Energy Solution's expanding manufacturing capabilities in the US and its growing presence in the global EV battery market, with potential implications for the company's future growth and competitiveness.
LG Energy Solution Ltd has secured a major contract worth KRW 5.9 trillion (US$ 4.3 billion) to supply lithium-ion phosphate (LFP) batteries to an overseas vehicle manufacturer, speculated to be Tesla, marking a significant milestone for the company's recently introduced LFP batteries.
The three-year contract, starting in August 2027, is subject to change based on further discussions with the client. This deal is notable for LG Energy Solution as it involves supplying LFP batteries, which have lower manufacturing costs and improved safety but lower energy density and shorter driving ranges compared to its nickel cobalt manganese (NCM) batteries.
Market analysts believe that Tesla is the likely client, as the company has been seeking a new source of LFP batteries outside China due to US import tariff hikes. LG Energy Solution operates several battery manufacturing plants in the US and has a joint venture with General Motors and other automakers, making it an attractive partner for Tesla.
The contract is significant for LG Energy Solution, as it exceeds the company's second-quarter revenue of 5.6 trillion Korean won. The company's shares traded up 0.26% on the news, indicating a positive market response to the deal. The contract's details, including the customer's identity, are subject to change and may be terminated.
The deal is expected to be tied to LG Energy Solution's new plant in Michigan, which recently began production. This partnership may help offset the company's lag in the EV lithium iron phosphate market and cement its position as a leading battery supplier to the global automotive industry.