Tesla Signs $4.3B South Korea, China Battery Deals Amid Supply Chain Shift

Tesla is significantly expanding its battery capabilities through two major initiatives: a $557 million investment in a large-scale battery facility in Shanghai, China, and a $4.3 billion multi-year lithium iron phosphate (LFP) battery supply agreement with South Korea’s LG Energy Solution (LGES). The Shanghai project, set to complete by 2027, will be the largest grid-scale battery power plant in China, aimed at stabilizing the electric grid by storing and releasing energy during peak demand. Concurrently, Tesla’s agreement with LGES, which will supply LFP batteries from its Michigan factory starting in 2027, reflects Tesla's strategic effort to reduce reliance on Chinese imports amid escalating U.S. tariffs on Chinese batteries. This diversification is crucial as tariffs on Chinese LFP cells have reached nearly 65%, expected to rise to over 82% by 2026, pressuring Tesla’s energy storage costs. Tesla’s energy division, responsible for over 10% of company revenue and recently exceeding $10 billion, is rapidly growing but faces challenges from geopolitical trade tensions. These moves underscore Tesla’s broader strategy to secure supply chains and maintain its leadership in the global battery energy storage market amidst evolving trade and regulatory landscapes.