In a significant move to diversify its battery supply chain, Tesla has reportedly signed a USD 4.3 billion deal with South Korea’s LG Energy Solution (LGES), a major supplier of lithium-ion batteries. The agreement is seen as a strategic effort by Tesla to reduce its reliance on Chinese manufacturers amid ongoing geopolitical and trade tensions.
According to sources familiar with the matter, the multiyear agreement will secure a steady supply of high-performance cylindrical batteries for Tesla’s electric vehicles, particularly those produced at the company’s factories in the United States and Germany. While both Tesla and LGES have not officially confirmed the deal, industry insiders say the collaboration will begin in 2025 and run through 2028.
The batteries will reportedly be produced at LGES’s plants in South Korea and its upcoming facility in Arizona, U.S. The Arizona plant is expected to play a key role in supplying Tesla’s next-generation models, including vehicles using the new 4680 battery format.
Analysts believe this move will not only strengthen Tesla’s supply chain but also provide LGES with a strong foothold in the global EV battery market, particularly in North America, where demand for locally sourced components is increasing due to policy incentives like the U.S. Inflation Reduction Act.
Tesla’s shift toward diversifying its suppliers comes at a time when Western automakers are under pressure to reduce their dependence on Chinese components, especially in key sectors like energy storage and electric mobility.
The USD 4.3 billion deal highlights the growing importance of strategic partnerships in the fast-evolving EV landscape, where battery technology and supply chain stability are increasingly critical to long-term success.
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