Likely to Supply LFP ESS from North American Production Base... Approximately 50GWh Scale

This is a 46-series battery electric vehicle [Yonhap News file photo]

LG Energy Solution announced on the 30th that it had signed a lithium iron phosphate (LFP) battery supply contract worth KRW 5.9442 trillion.

This represents 23.2% of last year's sales of KRW 25.6 trillion, making it the largest single ESS order in the company's history.

The order date was the 29th, and the contract period is for three years, from August 1, 2027.

LG Energy Solution explained, "This contract includes the option to extend the total contract period to seven years based on discussions with the customer, and to supply additional volume accordingly. Therefore, conditions such as contract amount and period may change in the future."

It added, "We cannot disclose details such as the contracting party due to the need for business secret protection."

In relation to this, Reuters reported, citing sources, that "LG Energy Solution has agreed to supply LFP batteries to be used in Tesla's ESS."

Tesla stated during its first-quarter earnings conference call that it was seeking LFP battery suppliers within the U.S., not in China, due to tariffs and other factors.

LG Energy Solution has the largest number of production bases in the U.S. among domestic battery companies, including facilities in Ohio, Tennessee, and Michigan.

The supply volume is approximately 50GWh (gigawatt-hours), assuming a price of $85 per cell.

As the U.S. strengthens tariff barriers against Chinese batteries, domestic battery companies like LG Energy Solution are seeing a halo effect.

Currently, Chinese-made ESS batteries imported into the U.S. are subject to a total tariff of 40.9%, including basic tariffs, reciprocal tariffs, and retaliatory tariffs related to fentanyl. This is estimated to rise to 58.4% next year.

Consequently, the price of Chinese-made LFP battery cells supplied to the U.S. is projected to increase from approximately $73 last year to about $87 next year.

Considering that the estimated supply price for LFP cells from domestic battery companies with U.S. production bases is in the range of $85-$90, the price advantage of Chinese batteries is expected to virtually disappear.

LG Energy Solution is accelerating its ESS orders, including a 4GWh contract for residential ESS batteries with Delta Electronics, a global energy management company with major clients such as Tesla and Apple, signed in March.

LG Energy Solution emphasized in its recent second-quarter earnings conference call, "We expect to achieve significant profit improvement in the second half of the year by offsetting electric vehicle battery performance with ESS sales growth." Yonhap News

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