Tesla Megapack batteries at the Harmony Energy Ltd and Fotowatio Renewable Ventures BV battery energy storage project near Burgess Hill, UK, May 11, 2021.
Chris Ratcliffe | Bloomberg | Getty Images
tesla has expanded its relationship with South Korea’s LG Energy Solutions, signing a deal to purchase $4.3 billion worth of battery cells for energy storage systems manufactured in Lansing, Michigan.
This factory was previously developed for a joint venture with LG. general motors The automaker has decided to withdraw from the project at the end of 2024 and sell its stake to LG as part of a reduction in investment in electric vehicles.
Tesla still derives the bulk of its revenue from EVs, but the company is investing in faster-growing energy businesses as data centers drive demand for electricity. Tesla’s MegaPack stores electricity generated using intermittent sources such as solar or wind or during off-peak hours, making it available for use when demand is high.
tesla currently sells Powerwall backup batteries for homes with solar installations, as well as much larger Megapack and Megablock systems for utility-scale energy storage. Last year, the company’s energy division revenue increased 27% to $12.8 billion, accounting for 13% of total revenue. Total revenue decreased due to a 10% decline in the automotive business.
Details of the Tesla and LG partnership were announced during the Indo-Pacific Energy Security Summit in Japan, according to a statement from the U.S. Department of the Interior. At the event, the Trump administration announced a total of $56 billion in private sector funding.
A spokesperson for LG Energy Solutions said the company will “install a dedicated production line at its Lansing facility to fulfill this agreement.” Last year, LG renovated its facility to manufacture LFP (lithium iron phosphate) prismatic batteries, later confirming that it had signed a $4.3 billion contract with an unnamed company.
While GM continues to have a significant presence in and around the Lansing battery plant, the company has significantly exited the EV market and announced a related write-down of $7.6 billion.
Meanwhile, Tesla expects its energy business to have “very strong growth for as long as you can imagine,” CEO Elon Musk said during a fourth-quarter earnings call in January. Chief Financial Officer Vaibhav Taneja warned that “profit compression” is expected in the energy sector due to low-cost competition and tariff costs.
Tesla’s competitors include companies such as China’s BYD and climate change technology startups such as Form, which makes iron-air batteries and other products.
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