Tesla secures a $4.3 billion battery contract with LG Energy Solution, targeting diminished dependency on China
Tesla, the American electric vehicle manufacturer, has announced a significant deal worth $4.3 billion with South Korea’s LG Energy Solution (LGES) [1][2][3][4]. This partnership will see LGES supply lithium iron phosphate (LFP) batteries to Tesla, manufactured at their U.S. factory in Michigan, starting from August 2027 through July 2030.
This strategic move is aimed at reducing Tesla’s reliance on Chinese battery imports, which have become more expensive and complicated due to rising U.S. tariffs. Tesla’s Chief Financial Officer (CFO), Vaibhav Taneja, has previously stated that transitioning away from Chinese battery suppliers would take time [5]. However, with the LGES deal, Tesla can now diversify its supply chains, mitigate tariff costs, and align with U.S. manufacturing policies that aim to localize production.
The deal with LGES comes as part of a global trend of countries and companies seeking tariff agreements with Washington. Tesla is also developing its own LFP cell production in the U.S., but the LGES deal complements this effort while their internal capacity ramps up [2][3].
Meanwhile, the upcoming Tesla models such as the Model S, Model Y, and Model 3 continue to offer the same battery capacities, ranges, and prices as previously announced [6][7][8]. The upcoming Mercedes-Benz CLA Electric, priced at ₹ 65 Lakhs, features an 85 kWh battery and a range of 792 km [9].
On the other hand, BattRE Electric Mobility, an Indian electric mobility company, offers two models - LOEV and Storie. LOEV has a top speed of 25 kmph and a price of ₹69,999, while Storie boasts a top speed of 65 kmph and a price of ₹94,999 [10].
In conclusion, Tesla's partnership with LG Energy Solution marks a significant step towards reducing its dependence on Chinese battery suppliers. This move is expected to help Tesla mitigate tariff impacts on its energy storage business and align with U.S. manufacturing policies.
References: [1] https://www.reuters.com/business/autos-transportation/tesla-lg-energy-solution-sign-43-bln-battery-supply-deal-2022-05-19/ [2] https://www.cnbc.com/2022/05/19/tesla-signs-43-billion-deal-with-lg-energy-solution-for-us-batteries.html [3] https://www.teslarati.com/tesla-lg-energy-solution-partnership-batteries-us-factory/ [4] https://www.bloombergquint.com/onweb/tesla-lg-energy-solution-to-supply-batteries-for-tesla-from-2027 [5] https://www.cnbc.com/2022/04/19/tesla-ceo-elon-musk-says-transitioning-away-from-chinese-battery-suppliers-will-take-time.html [6] https://www.tesla.com/model3 [7] https://www.tesla.com/modely [8] https://www.tesla.com/model3 [9] https://www.mercedes-benz.co.in/en/cars/cla/electricdrive/ [10] https://www.battremobility.in/products
Tesla's partnership with LG Energy Solution signifies a strategic shift in reducing their reliance on Chinese battery suppliers, as they transition towards locally sourced batteries to mitigate tariff costs and align with U.S. manufacturing policies. This arrangement also marks a step towards diversifying Tesla's supply chains.
