Tesla and LG Energy Officially Announce: Invest $4.3 Billion to Build Joint Battery Plant in the U.S.

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Tesla and Korean battery giant LG Energy have officially confirmed that they will jointly establish a $4.3 billion lithium iron phosphate battery factory in Lansing, Michigan, to support the rapid expansion of Tesla’s energy storage system business.

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

Following the announcement, LG Energy’s stock price rose by up to 3.3% during trading in the Seoul market.

This investment has urgent financial significance for Tesla. The company is currently highly dependent on lithium iron phosphate batteries manufactured overseas, and in the third quarter of 2025 alone, tariffs are expected to impact its energy storage business by about $200 million. Establishing a factory in the U.S. will lay a more cost-competitive supply foundation for the continued expansion of its energy storage business.

Factory Plan: Supply Megapack 3, Begin Production Next Year

The new factory is located in Lansing, the capital of Michigan, and will specialize in producing lithium iron phosphate prismatic batteries, with formal production planned for next year. The batteries produced will be used in Tesla’s Megapack 3 large energy storage systems manufactured at the Houston factory, creating a complete chain from domestic battery production to energy storage system integration in the U.S.

The U.S. Department of the Interior’s statement said, "Batteries manufactured in the U.S. will power Tesla’s Megapack 3 energy storage systems, forming a robust domestic battery supply chain." The project is also included in the energy security cooperation framework between the United States and Indo-Pacific countries, highlighting its strategic positioning.

Tesla currently relies heavily on overseas lithium iron phosphate batteries for its energy storage business, and this supply structure poses significant risks amid the increasingly escalating tariff environment. The company disclosed that in the third quarter of 2025, tariffs will affect its energy storage business by about $200 million.

To alleviate this pressure, Tesla continues to seek domestic lithium iron phosphate battery manufacturing to reduce production costs and diversify supply chain risks. The joint factory with LG Energy Solution in Michigan is a core deployment of this strategy.

LG Bets on Energy Storage: Slowed EV Market Forces Transformation

For LG Energy, this cooperation is an important part of its strategy to actively expand the energy storage market. Against the backdrop of a slowed transition in the U.S. electric vehicle market and intensifying competition from Chinese companies, the company is shifting its business focus toward the more rapidly growing energy storage sector.

LG Energy, along with domestic competitors Samsung SDI and SK On, are converting multiple electric vehicle battery production lines, aiming to increase energy storage battery capacity to over 60 GWh this year. This capacity transition, dominated by Korean battery companies, is reshaping the global energy storage supply landscape.

The core driving force behind these strategic deployments is the surge in electricity demand from data centers driven by the wave of artificial intelligence. According to Bloomberg New Energy Finance (BloombergNEF), U.S. data center energy storage demand will rise sharply from 2024, reaching 78 GWh by 2035—more than doubling from 2024—and will account for nearly 9% of total U.S. electricity demand at that time, surpassing electric vehicle and hydrogen sectors in growth rate.

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

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