Tesla has a new battery cell supplier. Although the automaker is vertically integrated to a degree not seen in the automotive industry for decades, when it comes to battery cells it’s mostly dependent upon suppliers. Panasonic cells can be found in many Teslas, with the cheaper, sturdier lithium iron phosphate (LFP) battery cells being supplied by CATL. Now Tesla has a new source of LFP cells thanks to a deal just signed with LG Energy Solutions.
According to The Korea Economic Daily, the contract between Tesla and LGES is worth $4.3 billion. LGES will begin supplying Tesla with cells next August through until at least the end of July 2030, with provisions to extend the contract if necessary.
The LFP cells probably aren’t destined for life on the road, however. Instead, they’ll likely be used in Tesla’s energy storage products, which both Tesla and LGES hope will soak up demand now that EV sales prospects look so weak in North America.
The deal also reduces Tesla’s reliance on Chinese suppliers. LGES will produce the LFP cells at its factory in Michigan, says Reuters, and so they will not be subject to the Trump trade war tariffs, unlike Chinese-made cells from CATL.
Although Tesla CEO Elon Musk has boasted about the size of the energy storage market, its contribution to Tesla’s financials remains meagre, and actually shrank during the last quarter.
