Tesla and LG Energy Solution Secure $4.3 Billion Deal for U.S.-Made LFP Battery Factory in Michigan.

In a major step toward strengthening America’s domestic battery supply chain and reducing reliance on foreign imports, the U.S. Department of the Interior has officially confirmed a landmark agreement between Tesla and South Korea’s LG Energy Solution. The $4.3 billion deal will fund the construction and operation of a new lithium iron phosphate (LFP) prismatic battery cell manufacturing facility in Lansing, Michigan, with production slated to begin in 2027.

The announcement, made during the Indo-Pacific Energy Security Summit as part of over $56 billion in private-sector energy commitments, ends months of speculation. LG Energy Solution first disclosed the massive supply contract in July 2025 without naming the buyer. Tesla has now been confirmed as the exclusive customer for the American-made LFP cells, which will directly power the company’s next-generation Megapack 3 energy storage systems assembled at its expanding Houston Megafactory.

Revitalizing a Former GM Site for Grid-Scale Storage

The Lansing plant – previously part of the Ultium Cells joint venture with General Motors – represents a full transition under LG Energy Solution’s ownership after GM exited in 2025. Repurposed for LFP prismatic cell production, the facility is expected to reach an annual capacity of around 50 GWh when fully ramped.

This positions it as one of the largest sources of LFP batteries, a chemistry prized for its safety, longevity, and lower cost in stationary storage applications compared to nickel-based chemistries used in many EVs. This partnership not only creates high-quality manufacturing jobs in Michigan but also positions the United States to lead in next-generation grid storage technology. 

The three-year core supply agreement (with options to extend up to seven years and scale volumes) aligns with surging U.S. demand for grid-scale energy storage. Tesla’s energy division has seen explosive growth, driven by utility projects, data center backup needs (including AI infrastructure), and renewable integration. In recent quarters, energy storage deployments have become a significant profit driver for the company.

Production of Megapack 3 is set to begin at Tesla’s new Houston Megafactory in late 2026, targeting 50 GWh annual capacity at full ramp. Complementing this is Tesla’s Megablock – a plug-and-play, pre-engineered medium-voltage storage block that integrates four Megapack 3 units with a transformer and switchgear. These innovations turn large-scale energy storage into modular, rapidly deployable infrastructure, likened by some observers to “Lego blocks for the grid.”

Tesla’s energy business continues to outpace many expectations, with executives highlighting strong 2026 backlogs and accelerated deployments once Megapack 3 and Megablock fully enter the market. 

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