Tesla Signs $4.3B LG Battery Deal to Boost U.S. Supply, Cut China Reliance originally appeared on Autoblog.
Tesla has signed a massive $4.3 billion deal with LG Energy Solution to supply lithium-ion phosphate (LFP) batteries produced in the United States. The agreement will span from August 2027 through July 2030, with the potential to extend to 2037. Unlike previous partnerships, this one focuses exclusively on energy storage systems like Powerwall and Megapack, not the company’s vehicle lineup—at least for now.
The move is a major step in reducing Tesla’s dependence on China for critical battery materials. In fact, the company’s energy division has faced ongoing pressure from high import costs, which Tesla’s CFO recently admitted had an “outsized” impact on profitability. It’s yet another sign of Tesla pivoting toward more domestic production after a string of difficult quarters.
That pressure has been mounting for a while. Tesla’s profits have nosedived recently, and a cheaper Model Y—stripped of its luxuries and built to a budget—is reportedly in the works to help claw back margins.
Energy Storage First, Cars Next?
For now, the batteries secured from LG’s Michigan plant will be reserved for home and grid storage products. However, it’s easy to imagine that future vehicle applications are on the table—particularly as Tesla tries to broaden its market reach.
A recently leaked video from China hinted at a radically de-contented affordable Model Y, and reports suggest the vehicle will be visually and mechanically distinct from current versions. This shift would likely demand a new supply of cost-effective battery packs—an area where LFP chemistry shines.
This comes as Tesla engineers have also floated the idea of a smaller Cybertruck, aimed at reducing cost and appealing to markets that find the full-size truck impractical.
Trouble On The Truck Front
The Cybertruck itself, once a symbol of Tesla’s bold ambition, is now becoming a poster child for overpromise. Quality concerns have plagued early deliveries, with owners reporting everything from panel gaps to drivetrain problems. One customer has even requested a buyback after service visits failed to fix a persistent issue.
It’s not an isolated case. Persistent quality problems have seen early adopters lose patience—and that’s without the truck hitting mainstream volumes yet.
While the Cybertruck struggles, Tesla’s energy division is increasingly seen as a stabilizing force. This LG deal solidifies Tesla’s commitment to that space, offering a domestic, tariff-proof supply chain for one of its fastest-growing business units.
The Bigger Picture
This isn’t Tesla’s first major attempt to de-risk its supply chain. The EV maker recently partnered with Samsung on a $16.5 billion chip deal to secure domestic production of next-generation AI hardware. Combined with this new LG agreement, Tesla is drawing a clear line between its future ambitions and the volatile Chinese sourcing that’s dominated its past.
It’s a smart move given the political climate—and a necessary one as competition from global EV startups continues to rise. For instance, Xiaomi’s new electric SUV drew nearly 10,000 preorders within 24 hours, a sobering reminder that Tesla’s dominance is no longer guaranteed.
Tesla Signs $4.3B LG Battery Deal to Boost U.S. Supply, Cut China Reliance first appeared on Autoblog on Jul 31, 2025
This story was originally reported by Autoblog on Jul 31, 2025, where it first appeared.
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