Tesla and LG Energy announced a $4.3 billion US battery plant joint venture

Tesla（TSLA） and LG Energy, a big South Korean battery company, have announced that they will build a $4.3 billion lithium iron phosphate (LFP) battery factory in Lansing, Michigan. This will help Tesla's energy storage business grow quickly.

In a statement, the U.S. Department of the Interior acknowledged the deal. The plant will make prismatic LFP batteries, and next year they will start mass production. The goods will be directly used to power Tesla's Megapack 3 energy storage systems, which are made in Houston. Bloomberg News was the first to report on the deal in July.

LG Energy's stock price went up as much as 3.3% on the Seoul Stock Exchange after the news came out.

This investment will have direct financial effects for Tesla. The company relies on LFP batteries made in other countries a lot right now, and tariffs alone are projected to cost its energy storage business about $200 million in the third quarter of 2025. Building a plant in the U.S. will give its energy storage business a cheaper way to get the supplies it needs to keep growing.

1、Factory planning: Supplying Megapack 3, production to begin next year

The new plant will be in Lansing, Michigan, and will make lithium iron phosphate (LFP) prismatic batteries. Work on the factory is set to start next year. The batteries that are made will be used in Tesla's Megapack 3 large-scale energy storage system, which is made at the company's factory in Houston. This completes the chain in the United States from making batteries to putting together energy storage systems.

"Domestically manufactured batteries will power Tesla's Megapack 3 energy storage system, forming a strong domestic battery supply chain," said a statement from the U.S. Department of the Interior. The project is also part of U.S.-Indo-Pacific energy security cooperation, which shows how strategically important it is.

As tariffs rise, Tesla's energy storage business will depend more and more on LFP batteries made in other countries. This supply system is very risky. The business said that taxes would have an effect on its energy storage business by about $200 million in the third quarter of 2025.

To ease this pressure, Tesla is still trying to get the production of lithium iron phosphate batteries moved closer to home. This would lower costs and spread out the risks in the supply chain. One important part of this plan is building a factory in Michigan with LG Energy Solutions.

2、LG bets on energy storage: Slowdown in electric vehicle development forces transformation

These partnerships are very important for LG Energy as it tries to quickly grow in the energy storage market. The company is shifting its attention to the quickly growing energy storage sector because the US electric vehicle market is changing less quickly and Chinese companies are becoming more of a threat.

LG Energy, along with its Korean partners Samsung SDI and SK On, is changing a number of production lines for batteries for electric vehicles. It wants to boost the capacity of its energy storage batteries to over 60 gigawatt-hours this year. South Korean battery companies are leading this change in size, which is changing the way energy is stored around the world.

As artificial intelligence (AI) grows, so does the need for more electricity in data centers. This is what led to this smart move. BloombergNEF says that the amount of energy that US data centers will need to store will increase a lot starting in 2024 and will reach 78 gigawatt-hours by 2035, which is more than twice as much as it was in 2024. This will use almost 9 percent of all the power in the US, which is faster than the growth rates of electric cars and hydrogen fuel cells.

Samsung SDI thinks that the US market for energy storage will grow from about 80 gigawatt-hours (GWh) now to 130 GWh in 2030. Because demand is expected to be high, Tesla and LG Energy are working together to get a strategic base in the US energy storage supply chain.