[K-Tech] LG Energy Solution secures 5.94 trillion won LFP battery deal with Tesla

LG Energy Solutions Michigan plant Courtesy of LG Energy Solution — LG Energy Solution's Michigan plant / Courtesy of LG Energy Solution

SEOUL, July 31 (AJP) - LG Energy Solution announced Wednesday it has signed a 5.9442 trillion won (about $4.25 billion) supply contract for lithium iron phosphate (LFP) batteries, marking the company’s largest-ever energy storage system (ESS) order to date.

The order represents 23.2 percent of LG Energy Solution’s 2023 revenue of 25.6 trillion won. The initial contract term spans three years starting August 1, with the possibility of extension to seven years based on customer negotiations, the company said in a regulatory filing.

The agreement includes provisions for potential volume expansion depending on discussions with the customer. The company also added it could not disclose the client due to business confidentiality.

The batteries are expected to be supplied to Tesla for use in its energy storage systems, according to industry specialists. Tesla previously stated during its first-quarter earnings call that it was seeking U.S.-based LFP battery suppliers due to tariff risks associated with China.

Among South Korean battery makers, LG Energy Solution holds the broadest U.S. manufacturing footprint, with plants in Ohio, Tennessee, and Michigan. Based on an estimated $85 per cell, the deal is projected to amount to approximately 50 GWh of battery supply.

The deal comes as U.S. tariffs on Chinese batteries intensify. Currently, imported Chinese ESS batteries face a combined tariff of 40.9 percent, including standard, retaliatory, and fentanyl-related penalties which is expected to rise to 58.4 percent next year.

With prices for Chinese LFP battery cells expected to climb from around $73 last year to $87 in 2025, South Korean battery firms with local production bases are poised to benefit. Analysts estimate domestic LFP cell prices in the U.S. will range between $85 and $90, narrowing the cost gap with Chinese rivals.

In March, LG Energy Solution signed a 4 GWh residential ESS battery deal with Delta Electronics, a global energy management firm with major clients including Tesla and Apple. The company said during its second-quarter earnings call that it aims to offset a slowdown in EV battery demand through growth in the ESS segment, projecting meaningful profit improvements in the second half of the year.

Lim Jaeho ajupresswogh@ajupress.com