Tesla, Inc. (TSLA.US) and LG Energy to jointly build a $4.3 billion battery factory, increasing their presence in the energy storage industry.

Tesla, Inc. (TSLA.US) will collaborate with LG Energy to invest $4.3 billion in building a battery factory in Lansing, Michigan, to support the car manufacturer's energy storage business. This deal, which was previously reported in July last year, is now officially confirmed and included in a statement from the US Department of the Interior to emphasize energy security cooperation between the US and Indo-Pacific countries. The statement mentions that the factory, which will produce lithium iron phosphate (LFP) square batteries, is expected to start production next year. It states, "Locally produced batteries will power Tesla, Inc.'s Megapack 3 energy storage systems produced in Houston, creating a strong domestic battery supply chain." At the same time, the agreement highlights LG Energy's expansion into the rapidly growing energy storage system (ESS) market to address the increasing demand from AI-driven data centers, slowing transition to electric cars in the US, and intensifying competition from Chinese rivals. Currently, Tesla, Inc. largely depends on LFP batteries produced in China, but is also accelerating diversification of its supply chain to address tariff pressures and reduce production costs. The company stated that tariffs impacted its energy storage business by approximately $200 million in the third quarter of 2025, and it is therefore seeking to localize LFP battery manufacturing. LG Energy, along with its local competitors Samsung SDI and SK On, are repurposing some of their electric vehicle battery production lines for energy storage battery production, with the goal of increasing ESS battery production to over 60GWh this year. Analysts predict that the demand for electricity in US data centers will more than double from 2024 to 2035 to over 78GWh, accounting for nearly 9% of total US electricity consumption, with growth surpassing that of electric vehicles and hydrogen demand. Samsung SDI also stated that the US ESS market is expected to grow from around 80GWh currently to 130GWh by 2030.