LG Energy Solution secured a contract for lithium iron phosphate (LFP) battery supplies that amounts to over 20% of its revenue last year. According to foreign media reports, the client is Tesla, an American electric vehicle manufacturer. This large-scale order is expected to serve as a stepping stone for LG Energy Solution to rebound from the difficulties it has faced during the prolonged slump in the electric vehicle market over the past few years.
On the 30th, the Financial Supervisory Service announced that LG Energy Solution signed a contract for the supply of lithium iron phosphate (LFP) batteries worth 5.9442 trillion won overseas. This is equivalent to 23.2% of last year's revenue of 25.6 trillion won and is the largest amount for a single contract in history. The contract period is for three years, starting from the 1st of next month.
A representative from LG Energy Solution noted, "This contract includes provisions to extend the total contract period up to seven years and to increase the supply quantity based on discussions with the client." However, he added, "Due to the need to maintain business confidentiality, I cannot disclose detailed information such as the contractual counterpart."
Regarding this contract, Reuters reported that "LG Energy Solution has decided to supply LFP batteries to be used in Tesla's energy storage systems (ESS)."
Earlier, during its first-quarter earnings announcement, Tesla stated that it planned to procure LFP batteries from battery manufacturers with factories in the United States, considering various factors such as tariffs. LG Energy Solution has been operating battery plants in Ohio, Tennessee, and Michigan.
The decision by Tesla to procure batteries locally in the U.S. is believed to be influenced by the increased tariff barriers in the United States. Currently, a tariff of 40.9% is applied to Chinese-made ESS batteries entering the U.S., which is expected to rise to 58.4% next year. While LFP batteries from Chinese companies such as CATL and BYD dominate the market, high tariffs have essentially blocked their export to the United States.
LG Energy Solution, which has been struggling to improve its performance amid the ongoing electric vehicle chasm, is recently seeking breakthroughs in the ESS battery market. In March, it signed a contract for residential ESS batteries with a capacity of 4 gigawatt-hours (GWh) with Delta Electronics, a global energy management company with clients such as Tesla and Apple.