Tesla and LG Energy Official Announcement: $4.3 Billion Investment to Build Battery Factory in US Together

Tesla and South Korea’s battery giant LG Energy Solution have officially confirmed that they will jointly build a $4.3 billion lithium iron phosphate (LFP) battery plant in Lansing, Michigan, to support Tesla’s rapid expansion of its energy storage system business.

The U.S. Department of the Interior officially confirmed this deal in a statement. The plant will produce prismatic lithium iron phosphate batteries, with mass production planned to start next year. The products will be directly supplied to Tesla’s Megapack 3 energy storage systems manufactured in Houston. Bloomberg News first disclosed the cooperation agreement earlier this July.

Following the announcement, LG Energy Solution’s stock price rose by as much as 3.3% during intraday trading in Seoul.

For Tesla, this investment has urgent financial significance. The company currently relies heavily on overseas manufacturing of lithium iron phosphate batteries, which, in Q3 2025 alone, was impacted by tariffs to the tune of approximately $200 million for its energy storage business. Building a factory in the U.S. will establish a more cost-competitive supply foundation for its ongoing energy storage expansion.

Factory Plan: Supplying Megapack 3, Launching Next Year

The new factory, located in Lansing, Michigan, will be dedicated to producing prismatic lithium iron phosphate batteries, with formal production scheduled for next year. The batteries produced will be used in Tesla’s Houston-made Megapack 3 large-scale energy storage systems, creating a complete supply chain from domestic battery production to energy storage system integration in the U.S.

The U.S. Department of the Interior stated, “Batteries manufactured domestically will power Tesla’s Megapack 3 energy storage systems, forming a robust domestic battery supply chain.” The project is also included in the U.S.-Indo-Pacific energy security cooperation framework, highlighting its strategic importance.

Currently, Tesla’s energy storage business relies heavily on overseas lithium iron phosphate batteries, which poses significant risks amid increasingly stringent tariffs. The company disclosed that tariffs impacted its energy storage business by about $200 million in Q3 2025.

To mitigate this pressure, Tesla continues to pursue localization of lithium iron phosphate battery manufacturing to reduce production costs and diversify supply chain risks. Co-building a factory with LG Energy Solution in Michigan is a core part of this strategy.

LG Bets on Energy Storage: EV Slowdown Accelerates Transformation

For LG Energy Solution, this partnership is an important part of its strategic push into the energy storage market. Amid a slowdown in the U.S. electric vehicle market and increasing competition from Chinese companies, the company is shifting its focus toward the faster-growing energy storage sector.

LG Energy Solution, along with domestic competitors Samsung SDI and SK On, is transforming multiple EV battery production lines, aiming to increase energy storage battery capacity to over 60 GWh this year. This capacity shift led by Korean battery companies is reshaping the global energy storage supply landscape.

The core driver behind this strategic move is the surge in data center power demand driven by the AI boom. BloombergNEF predicts that U.S. data center energy storage demand will grow significantly from 2024, reaching 78 GWh by 2035—more than doubling 2024 levels—and will account for nearly 9% of the total U.S. electricity consumption, outpacing growth in EVs and hydrogen sectors.

Samsung SDI expects the U.S. energy storage market to grow from about 80 GWh currently to 130 GWh by 2030. In this strong demand outlook, Tesla and LG Energy’s collaboration aims to seize a strategic high ground in the domestic U.S. energy storage supply chain.

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