Tesla(TSLA.US), LG Energy jointly invest $4.3 billion in battery factory to expand energy storage sector footprint

K-LinePoet · 2026-03-28T00:18:36+00:00

Tesla and LG Energy are investing $4.3 billion in Michigan to build a battery factory that will produce lithium iron phosphate batteries to support energy storage systems. This move aims to strengthen domestic battery production in the U.S., reduce reliance on Chinese supplies, and meet the growing demand in the energy storage market. The battery factory is expected to start production next year.

K-LinePoet

2026-03-28 00:18:36

Abstract generation in progress

Tesla (TSLA.US) will partner with LG Energy to invest $4.3 billion in a battery factory in Lansing, Michigan, supporting the automaker’s energy storage system business. This deal, which was previously reported last July, has now been officially confirmed and included in a statement from the U.S. Department of the Interior, emphasizing the energy security cooperation between the U.S. and Indo-Pacific countries.

The statement indicates that the factory, which will produce lithium iron phosphate (LFP) prismatic batteries, is expected to begin production next year. The statement reads: “Batteries produced domestically in the U.S. will power Tesla’s Megapack3 energy storage system manufactured in Houston, thereby creating a robust domestic battery supply chain.”

At the same time, the agreement also highlights that LG Energy, the South Korean battery manufacturer, is actively expanding into the rapidly growing energy storage system (ESS) market to address the surge in demand primarily driven by AI-driven data centers, the slowdown in the U.S. electric vehicle transition, and increased competition from Chinese rivals.

Tesla currently relies heavily on LFP batteries produced in China while also accelerating its supply chain diversification efforts to address tariff pressures and lower production costs. The company stated that by the third quarter of 2025, tariffs will impact its energy storage business by approximately $200 million, and it is therefore seeking to promote domestic LFP battery manufacturing.

LG Energy, along with its domestic competitors — Samsung SDI and SK On — is repurposing some of its electric vehicle battery production lines for energy storage battery production, aiming to increase ESS battery output to over 60 gigawatt-hours (60GWh) this year.

Analysts predict that the demand for electricity from U.S. data centers will more than double from 2024 to 2035, reaching 78GWh, accounting for nearly 9% of total U.S. electricity consumption, with growth rates exceeding those of electric vehicles and hydrogen demand. Samsung SDI has also indicated that the size of the U.S. ESS market is expected to grow from the current approximately 80GWh to 130GWh by 2030.

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