The U.S. government announced on Monday that Tesla, the electric vehicle (EV) manufacturer, and LG Energy Solution of South Korea have entered into a supply agreement to construct a $4.3 billion lithium iron phosphate (LFP) prismatic battery cell manufacturing plant in Lansing, Michigan. The facility is expected to commence production in 2027.

According to a statement by the U.S. Department of the Interior, the American-made cells will be utilized to power Tesla’s Megapack 3 energy storage systems manufactured in Houston, establishing a robust domestic battery supply chain.

This agreement between Tesla and LG Energy Solution was part of a series of deals emphasized during the Indo-Pacific Energy Security Summit, as highlighted by the administration of President Donald Trump. Earlier in July, a source revealed to Reuters that LG Energy Solution had inked a $4.3 billion deal with Tesla to supply energy storage system batteries, aiming to lessen its dependence on Chinese imports due to tariffs.

LG Energy Solution, one of the few LFP battery producers in the U.S., previously disclosed a $4.3 billion contract to supply LFP batteries globally over three years, without specifying the client or the intended use in vehicles or energy-storage systems.

Furthermore, LG Energy Solution also operates NextStar Energy in Windsor, Ontario, a battery cell factory that was previously a joint venture with Stellantis until Stellantis sold its share to LG, making LG the sole proprietor. The Canadian plant, subsidized by the Ontario and Canadian federal governments, was initially focused on serving the EV battery market but has shifted its focus to prioritize energy storage in response to a challenging EV market landscape, while still retaining the capability to produce batteries for electric vehicles.