Tesla Confirmed as Partner in $4.3 Billion Domestic Battery Deal
The Department of the Interior has put an end to months of speculation by naming Tesla as the other party to a huge domestic lithium iron phosphate battery contract that will help the U.S. make more energy storage.
The U.S. Department of the Interior (DOI) has officially confirmed that Tesla is the customer behind a historic $4.3 billion supply agreement with LG Energy Solution (LGES). The announcement, which was made during the Indo-Pacific Energy Security Summit, marks a major shift in Tesla’s strategy as it moves its supply chain for large-scale energy storage to land.
Michigan Manufacturing to Supply Megapack Systems
In August 2025, regulatory filings first hinted at the deal. It includes the delivery of lithium iron phosphate (LFP) battery cells made at LGES’s factory in Lansing, Michigan.
The first filing only mentioned an “unnamed overseas client,” but industry experts and contributors to pv magazine had long pointed to Tesla.
One of the main reasons for the partnership is to lower the rising U.S. tariffs on Chinese goods. Tesla makes sure that its Megapack energy storage systems stay cost-competitive and meet domestic content requirements under the Inflation Reduction Act (IRA) by getting LFP cells from Michigan instead of big Chinese companies like CATL.
LFP chemistry is especially good for stationary storage because it is safe and has a long cycle life. Chinese manufacturing has been in charge of it for a long time.
Long-Term Supply Agreement Through 2030
The contract will start on August 1, 2027, and end on July 31, 2030. The agreement has clauses that could allow for a seven-year extension, which would mean that LGES could keep supplying Tesla until 2037.
Tesla’s assembly plant in Houston, Texas, will put the Michigan-made cells into its Megapack 3 units. This should greatly lower the time it takes to get things done and the cost of logistics for utility-scale solar-plus-storage projects all over North America.
LGES is turning its Lansing site into a specialized hub for prismatic LFP cells to meet the demand. When it is up and running, the site will make LGES the first global manufacturer to offer all three major form factors (pouch, cylindrical, and prismatic) from a single domestic footprint.
