^{A Tesla Megapack battery at the Harmony Energy Ltd. and Fotowatio Renewable Ventures BV battery energy storage project near Burgess Hill, England, May 11, 2021.}

^{Chris Ratcliffe | Bloomberg | Getty Images}

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Tesla is deepening its partnership with South Korea’s LG Energy Solution, signing a $4.3 billion agreement to purchase battery cells produced at LG’s Lansing, Michigan facility for use in utility-scale energy storage systems. The Lansing plant was originally developed as a joint venture with General Motors before GM exited the project in late 2024, selling its stake to LG amid a broader retrenchment in its EV investments.

Focus on Energy Storage Growth

While electric vehicles still generate the majority of Tesla’s revenue, the company is increasingly investing in its energy segment. Tesla’s Megapacks store power from intermittent sources like solar and wind, or during off-peak hours, delivering electricity when demand is high. Residential customers also use Powerwall batteries alongside solar installations, while Megapack and Megablock systems serve utility-scale clients.

Tesla’s energy revenue surged 27% last year to $12.8 billion, accounting for 13% of total revenue, even as total revenue dipped due to a 10% decline in automotive sales. CEO Elon Musk described the energy business as having “very high growth for as far into the future as we can imagine,” while CFO Vaibhav Taneja noted the segment faces potential margin compression from low-cost competition and tariffs.

Lansing Plant and Production Details

LG Energy Solution plans to establish dedicated production lines at Lansing to supply Tesla’s order. The facility was retooled last year to produce lithium iron phosphate (LFP) prismatic cells and is now fully aligned with Tesla’s energy storage requirements. GM maintains a presence in Lansing but has largely stepped back from EV manufacturing, recording $7.6 billion in related write-downs.

Strategic Context and Industry Competition

The Tesla-LG deal was announced during the Indo-Pacific Energy Security Summit in Japan, part of $56 billion in private sector commitments highlighted by the U.S. Department of the Interior. Tesla faces competition in energy storage from companies such as BYD and climate-tech startups like Form Energy, which are developing iron-air battery technologies.

With the Lansing facility secured, Tesla aims to scale production for utility projects and expand its footprint in global energy storage, supporting a long-term shift toward integrating renewable power and addressing increasing electricity demand from data centers and industrial users.