Electric vehicle maker Tesla (TSLA) has signed a $4.3 billion U.S. battery supply deal with South Korea’s LG Energy Solution.
The agreement will see LG Energy Solution supply Tesla with lithium iron phosphate, or LFP, batteries. Those batteries don’t use expensive and controversial elements such as cobalt.
LG Energy Solution becomes a new supplier for Tesla, which previously relied on its own internal battery production as well as supplies from battery giant Panasonic (PCRFF).
The deal also marks a shift away from lithium-ion batteries for Tesla and could help to shield the electric vehicle maker from U.S. tariffs as LG Energy has U.S.-based battery facilities.
In addition to making some of its own batteries, Tesla has a large battery-storage business. The company’s energy generation and storage business posted sales of $2.8 billion U.S. in this year’s second quarter.
Tesla and other automakers are trying to develop and use ever more efficient batteries that can extend driving range while reducing charging times and lowering costs.
Analysts say that batteries remain key to more widespread adoption of electric vehicles around the world.
TSLA stock is down 15% this year as the company reports declining electric vehicle sales. The shares are currently trading at $321.20 U.S.
