Tesla’s energy storage business is actually its fastest-growing business, and is shipping Megapacks and Powerwalls at an unprecedented rate. To help keep up with demand, Tesla is working to secure even more domestic battery supply.
According to recent reports from South Korea, LG Energy Solution has struck a deal to manufacture LFP (Lithium Iron Phosphate) batteries specifically for Tesla’s Energy Storage Systems (ESS). Best of all for Tesla’s North American operations, these cells will be built in the United States.
The Lansing Facility
The new LFP cells will be manufactured at LG’s massive facility in Lansing, Michigan. With a total production capacity of 50 GWh per year, the Lansing site will be one of LG Energy Solution’s largest battery plants in all of North America.
To accommodate Tesla’s massive energy storage needs, LG is actively converting a significant portion of the Lansing factory’s production lines to focus exclusively on LFP for Tesla. According to the report from South Korea, LG has already placed orders for all the new LFP equipment required for the new production lines.
If the retooling goes according to plan, mass production of Tesla-bound LFP cells is expected to begin in the second half of 2027.
Adding to Tesla’s Capacity
This isn’t the only capacity for LFP that Tesla is working on securing - its own LFP plant is now operational and beginning to ramp its production as per the Q4 2025 Earnings Call. Tesla has been pushing to vertically integrate LFP production in North America over the last several years, rather than relying on imported sources.
Why LFP?
For stationary storage, LFP is the undisputed king of today’s battery chemistries. Unlike the energy-dense nickel-based batteries used in most Tesla vehicles today, stationary storage doesn’t need to be ultra-lightweight.
Instead, it needs to be durable, safe, and cost-effective to produce. LFP cells perfectly fit the bill, as they degrade much more slowly over thousands of daily charge and discharge cycles, carry practically zero risk of thermal runaway, and eliminate the need for costly minerals like cobalt and nickel.
IRA Tax Advantage
Perhaps the most crucial aspect of this deal is the location. Currently, the global LFP market is overwhelmingly dominated by Chinese suppliers like CATL and BYD. While Tesla maintains strong partnerships with these companies - and has their cells in Megapacks and Powerwalls built in Mega Shanghai - relying heavily on imported Chinese cells exposes Tesla to geopolitical supply chain risks and import tariffs.
By having LG manufacture these LFP cells in Michigan, Tesla guarantees a stable, North American supply chain for its Megafactories in California and Texas. Plus, sourcing cells domestically allows Tesla's commercial and residential energy customers to take full advantage of the lucrative tax credits baked into the US Inflation Reduction Act (IRA), a massive competitive advantage that makes Tesla's energy products even more financially appealing.
With Tesla Energy recently posting record-breaking deployment numbers, this LG partnership ensures the battery supply will be there to meet the soaring demand.
