Tesla and LG Energy Solution are set to invest over $4 billion in a new battery manufacturing facility in the United States, in a move aimed at strengthening domestic supply chains and supporting the rapid growth of grid-scale energy storage.
The project centres on a plant in Lansing, Michigan, where LG Energy Solution will produce lithium iron phosphate (LFP) battery cells for Tesla’s energy storage division. Production is expected to begin in 2027, with the batteries destined primarily for Tesla’s Megapack systems.
The agreement builds on an earlier supply deal between the two companies and reflects Tesla’s strategy of expanding its energy storage business, which has become a key growth driver as demand rises from utilities and data centres.
Tesla replaces GM
The Michigan facility was originally developed as part of a joint venture with General Motors, but has since been repurposed following GM’s decision to scale back its electric vehicle battery plans. LG Energy Solution has taken full control of the site and is now redirecting production towards stationary storage applications.
LFP chemistry is increasingly favoured for these applications due to its lower cost and improved thermal stability compared with nickel-based lithium-ion batteries. The shift also aligns with broader industry trends, as battery manufacturers respond to slowing EV demand by reallocating capacity towards energy storage systems.
The investment is expected to support efforts to localise battery production in the United States and reduce reliance on imports, particularly from China, which currently dominates global LFP supply.
For LG Energy Solution, the deal represents one of its largest contracts to date and reinforces its position as a key supplier in the North American market. For Tesla, it provides a secure domestic source of cells to support continued expansion of its Megapack business, which is increasingly seen as central to the company’s long-term growth strategy.
Photo: The battery factory will supply the Powerwall and Megapack ESS products. (© Tesla)
