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LG Energy signs $4.3 billion deal with buyer rumored to be Tesla

Published: 30 Jul. 2025, 19:10

LG Energy Solution's plant in Holland, Michigan [LG ENERGEY SOLUTION]

LG Energy Solution secured a lithium iron phosphate (LFP) battery contract worth 5.94 trillion won ($4.3 billion), providing a much-needed revenue boost amid a temporary lull in global electric vehicle (EV) demand.

While the company did not disclose the client, industry sources believe the batteries are destined for energy storage systems (ESS) used by Tesla. The deal signals a full-fledged push by Korean battery makers into the North American ESS market.

LG Energy Solution announced on Wednesday in a regulatory filing that it had signed a three-year supply agreement worth 5.94 trillion won — equivalent to 23.2 percent of its 2024 revenue.

The company added that the contract period could be extended up to seven years depending on discussions with the customer, meaning the final deal could grow.

“Due to business confidentiality, we cannot disclose details such as the buyer’s identity,” the company said.

The deal marks LG Energy Solution’s largest-ever single ESS contract. The supply volume is estimated at around 50 gigawatt-hours (GWh). As of late June, the company held more than 50 GWh in backlogged ESS orders in North America, and, with this deal, its order backlog appears to have surpassed 100 GWh.

LG Energy Solution's plant in Holland, Michigan is pictured on Feb. 18. [LG ENERGEY SOLUTION]

Many in the industry suspect that Tesla is the buyer. During its first quarter earnings call, the company said it was looking for a U.S. LFP battery supplier due to tariffs on Chinese imports.

Until recently, Chinese firms have dominated the global LFP market. But with steep U.S. tariffs, Korean battery makers are now benefiting from what industry watchers describe as a “tariff dividend.”

Chinese-made ESS batteries currently face a total import tariff of 40.9 percent in the United States, which is set to rise to 58.4 percent next year. As a result, the average price of Chinese LFP batteries in the United States is expected to jump from around $73 to $87 per unit.

Given that Korean-made LFP batteries produced in the U.S. are priced between $85 and $90, China’s cost advantage has effectively disappeared.

Currently, LG Energy Solution is the only company with local mass-production capacity for ESS LFP batteries in North America. It began manufacturing them at its Michigan plant in May and plans to scale up to 17 GWh by the end of the year and more than 30 GWh by the end of 2026.

An employee inspects the battery production process at LG Energy Solution's plant in Holland, Michigan on June 1. [LG ENERGY SOLUTION]

“We expect a significant increase in ESS revenue in the second half as we begin full-scale shipments of U.S.-produced volumes starting in the third quarter,” said CFO Lee Chang-sil during the company’s recent second-quarter earnings call.

As EV growth slows, the ESS market is emerging as a vital alternative for battery manufacturers. Demand is rising rapidly in tandem with the spread of AI data centers.

SNE Research projected that the global ESS market would grow from 185 GWh in 2023 to 618 GWh by 2035 — an average annual growth rate of 10.6 percent. The North American ESS market alone is expected to grow from 55 GWh to 181 GWh during the same period.

“ESS is practically the only viable growth market left for battery companies grappling with EV demand slowdown,” said an industry source. “With U.S. tariffs pushing Chinese batteries out of the market, Korean battery makers are likely to intensify their focus on North America.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY CHOI SUN-EUL [[email protected]]