Tesla’s energy storage unit is its fastest-growing segment, with Megapacks and Powerwalls shipping at an unprecedented rate. To keep pace with demand, the company is securing additional U.S.-based battery supply.
According to recent reports from South Korea, LG Energy Solution has agreed to produce LFP (Lithium Iron Phosphate) batteries for Tesla’s Energy Storage Systems (ESS), and these cells will be manufactured in the United States.
The Lansing Facility
Production will take place at LG’s facility in Lansing, Michigan. With a total production capacity of 50 GWh per year, the Lansing site will be among LG Energy Solution’s largest battery plants in North America.
To meet Tesla’s energy storage demand, LG is converting a significant portion of the factory’s lines to focus exclusively on LFP for Tesla. The report indicates LG has already placed orders for all the new LFP equipment required for these lines.
If retooling proceeds as planned, mass production of LFP cells for Tesla is expected to begin in the second half of 2027.
Adding to Tesla’s Capacity
This is not the only LFP capacity Tesla is arranging—its own LFP plant is now operational and beginning to ramp production, as stated during the Q4 2025 Earnings Call. The company has been moving to vertically integrate LFP production in North America in recent years rather than relying on imported sources.
Why LFP?
For stationary storage, LFP is widely considered the preferred chemistry. Unlike the energy-dense nickel-based batteries used in most Tesla vehicles today, stationary systems do not need to be ultra-lightweight.
Instead, priorities include durability, safety, and cost. LFP cells 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 such as cobalt and nickel.
IRA Tax Advantage
Location is a key factor. The global LFP market is dominated by Chinese suppliers such as CATL and BYD. Tesla maintains partnerships with these companies—and uses their cells in Megapacks and Powerwalls built in Mega Shanghai—but heavy reliance on imported Chinese cells introduces geopolitical supply chain risks and import tariffs.
Having LG manufacture these LFP cells in Michigan supports a stable, North American supply chain for Tesla’s Megafactories in California and Texas. Domestic sourcing also enables Tesla’s commercial and residential energy customers to take full advantage of tax credits under the US Inflation Reduction Act (IRA).
With Tesla Energy recently posting record-breaking deployment numbers, the LG partnership helps ensure the cell supply needed to meet rising demand.
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