LG Energy Solution Ltd. said it will produce $4.3 billion worth of batteries in Michigan for Tesla's energy storage systems business. 

LG confirmed the deal, reported by Bloomberg News in July, on March 17 after it was mentioned in a U.S. Department of the Interior statement to highlight energy security cooperation between the US and Indo-Pacific nations.

Production at the lithium-iron-phosphate prismatic battery cell plant is scheduled to begin next year, the statement said. 

“American-made cells will power Tesla’s Megapack 3 energy storage systems produced in Houston, creating a robust domestic battery supply chain,” it said.  

The agreement underscores the South Korean battery maker’s aggressive expansion into the fast growing energy storage system market in response to surging demand primarily from AI-driven data centers, a slowing electric-vehicle transition in the U.S. and intensifying competition from China. 

Tesla, which currently relies heavily on Chinese-made LFP cells, has also been stepping up efforts to diversify its supply chain to mitigate tariffs pressure and reduce production costs. The company reported that the tariff impact on its energy storage business amounted to roughly $200 million in the third quarter of 2025 alone, and it was seeking to localize LFP battery manufacturing. 

LG, alongside domestic rivals like Samsung SDI Co. and SK On, has been repurposing several EV battery production lines, aiming to raise its ESS cell output to more than 60 Gwh this year. 

LG said in a statement it plans to install a new production line at the facility in Lansing, Michigan to fulfill the Tesla order. Tesla didn’t immediately respond to a request for comment.

BloombergNEF forecasts demand from U.S. data centers will more than double from 2024 to 78 Gwh by 2035, accounting for nearly 9% of the country’s entire electricity demand and outpacing growth in EVs and hydrogen. Samsung SDI has said the US ESS market is projected to reach 130 Gwh in 2030 from around 80 GWh now.