Tesla and LG Energy Solution Finalize $4.3 Billion Michigan Plant for Domestic LFP Battery Production

Tesla and South Korea's LG Energy Solution (LGES) have formalized a supply agreement to co-develop a significant lithium iron phosphate (LFP) prismatic battery cell manufacturing facility in Lansing, Michigan. The joint venture, valued at $4.3 billion, was officially announced on Monday, March 16, during the Indo-Pacific Energy Security Ministerial and Business Forum held in Tokyo, according to confirmation from the U.S. Department of the Interior.

This strategic undertaking is specifically designed to supply Tesla's Megapack 3 energy storage systems, which are assembled in Houston. The development aims to establish a more resilient domestic battery supply chain within North America, directly addressing the electric vehicle maker's stated objective to reduce reliance on components sourced from China amid ongoing geopolitical tensions and tariffs.

The Lansing facility will concentrate on producing LFP prismatic battery cells, with production scheduled to begin in 2027. The site carries a recent operational history, as LG Energy Solution acquired it fully from General Motors (GM) in May 2025. This location was formerly known as Ultium Cells 3, a joint venture between LGES and GM, which GM divested from to improve capital efficiency following a slowdown in North American battery electric vehicle demand.

LGES's sole control over the nearly completed facility allowed for immediate access to begin equipment installation, a more direct path than initiating construction on a new site. The confirmed deal outlines that LGES will supply these American-made cells to Tesla for a three-year period, commencing August 1, 2027, and concluding July 31, 2030, with the contract value approximating $4.26 billion, or 5.94 trillion won.

LGES is positioned as one of the few manufacturers currently producing LFP batteries within the United States, a chemistry historically dominated by Chinese manufacturers. Tesla's prior dependence on suppliers such as CATL for Megapack systems underscores the strategic importance of this localization effort. The U.S. Department of the Interior highlighted this agreement as a key element in fostering a robust domestic battery ecosystem, aligning with federal strategies to strengthen the North American electric vehicle and energy storage sectors.

This $4.3 billion investment in Michigan signals an accelerated timeline for localized, large-scale energy storage component manufacturing, positioning Tesla to mitigate risks associated with geopolitical exposure and cost volatility linked to foreign material processing.