LG's $4.3B Michigan factory will power Tesla's Megapack 3 — and cut China out of the loop
Tesla's energy storage business is booming — and it just locked in the battery supply chain to match. LG Energy Solution has officially launched lithium iron phosphate (LFP) battery production at its Lansing, Michigan factory, under a confirmed $4.3 billion contract to supply Tesla's next-generation Megapack 3 grid storage systems. Full-scale deliveries begin in 2027 and run through 2030, covering three years of supply as Tesla pushes hard to expand its energy division.
Why Michigan, why now
Tesla's energy segment pulled in $12.7 billion in revenue in 2025 — about 13% of the company's total — with Megapack deployments jumping 50% year-over-year to 46.7 GWh. That growth created a real supply bottleneck. Until now, Tesla sourced LFP cells largely from Chinese manufacturers, including CATL, leaving it exposed to punishing import tariffs under the Inflation Reduction Act's domestic content rules. The LG deal removes that vulnerability, per Electrek.
The Lansing plant has a history worth noting. It was previously the Ultium Cells joint venture between GM and LG — a facility originally built to supply EV batteries for General Motors. GM sold its stake to LG in May 2025, and the factory has since been converted from NMC pouch cells to the LFP prismatic format Tesla needs for Megapack 3. The US Department of the Interior confirmed the deal publicly, framing it as a domestic supply chain resilience win against Chinese imports.
Today, LG Energy officially opened its new $4 billion battery production plant in Lansing, Michigan that will help supply @Tesla with LFP cells for their new Megapack 3 energy storage product.
— Sawyer Merritt (@SawyerMerritt) August 18, 2026
The plant aims to reach more than 35GWh of annual capacity at full-scale production.… pic.twitter.com/ABywCbPLsX
The scale
When fully operational, the Michigan facility will exceed 35 GWh of annual production capacity. LG Energy Solution's broader North American target is over 50 GWh of energy storage capacity by the end of 2026, per Energy Storage News. That positions LG as the dominant US-based LFP supplier for grid-scale storage — a space where CATL and BYD have historically held most of the cards.
What it means for Megapack buyers
For businesses and utilities buying Megapack 3 systems in the US, this deal should ease availability and insulate pricing from tariff swings. Tesla has been constrained by supply, not demand, on the energy side — so more cells mean faster deployments. The IRA's domestic content bonuses also become easier to claim with US-made LFP inside the pack, which can improve the economics of grid storage projects claiming federal tax credits.
