Tesla Megapack Surge Ignites LFP Race Among South Korea’s Top Battery Firms

South Korean Battery Makers Vie for North American ESS Battery Orders Amid Regulatory Changes

Due to a convergence of Tesla’s Energy Storage System (ESS) supply chain diversification and the United States’ tightening regulations on China, South Korea’s three major battery manufacturers are entering a competition for North American ESS Lithium Iron Phosphate (LFP) battery orders. With electric vehicle demand slowing, these companies are now turning to ESS as a potential new growth avenue, leading to heated competition over mass production capabilities and customer acquisition.

LG Energy Solution Prepares for Tesla’s Battery Demand

According to industry insiders, LG Energy Solution commenced full operations at its plant in Lansing, Michigan last month and is hastening the construction of prismatic battery mass production lines. The move is in anticipation of supplying ESS batteries to Tesla starting next year. The Lansing plant was initially planned to operate as Ultium Cells’ third facility, a joint venture with General Motors (GM), but amid weak EV demand, LG Energy Solution acquired the assets and transformed it into an independent production base. This facility will produce Nickel Cobalt Manganese (NCM) batteries for Toyota as well as NCM and LFP batteries for ESS uses.

Tesla’s Demand for Diversified Power Supply

Tesla’s request for prismatic LFP battery production is driving LG Energy Solution’s efforts. As ESS demand increases due to the expanding artificial intelligence (AI) infrastructure and burgeoning power grid requirements in the United States, the Inflation Reduction Act (IRA) imposes conditions for domestic production and places restrictions on Chinese component content. This has led Tesla to secure non-Chinese battery supply chains.

Tesla’s rapid expansion of its flagship ESS product, the Megapack, is another driving factor. After establishing 40 GWh of annual production capacity at its Lathrop Megafactory in California, the company is now producing the next-generation Megapack 3 and the large-format Megablock platform at its Brookshire, Texas Megafactory. This facility has an annual production capacity of 50 GWh, and Tesla’s total U.S. ESS production capacity is projected to reach around 90 GWh annually by next year.

Samsung SDI Plans to Broaden Tesla’s ESS Battery Supply

Samsung SDI is also gearing up to broaden ESS battery supply to Tesla. The company signed a substantial contract for large-format battery cells in January, with industry insiders speculating that the volume is earmarked for LFP batteries to be used in Tesla Megapacks. The supply volume is estimated to be around 10 GWh annually over a three-year period.

In line with these orders, the company has been ramping up its U.S. ESS battery production capacity. It is transforming existing production lines at the StarPlus Energy (SPE) plant in Indiana—a joint venture with Stellantis—into ESS LFP battery cell lines. Full-scale mass production is projected to commence as early as this year.

SK On Increases Presence in North American ESS Market

SK On is also making its mark in the North American ESS market. The company inked a supply contract with U.S. ESS firm NeoVolta Power for a total of 9 GWh of ESS LFP pouch battery cells over five years, from 2027 to 2031. These batteries will be manufactured at its Georgia plant. SK On is also pursuing an additional 9 GWh supply through a separate contract this year, which could extend the total collaboration to 18 GWh if executed as planned.

Large-Scale ESS Orders Opportunities Emerges in South Korea

Besides the North American market, large-scale ESS order opportunities are also arising in South Korea. The Korea Power Exchange is set to announce the third ESS central contract market tender this month, with an order volume of around 1 trillion won (approximately $742.0 million), targeting supply for 2028.

Tighter Regulations on Chinese Supply Chains

For the North American ESS market, the competitiveness of South Korea’s three major battery manufacturers is expected to depend on their ability to establish non-Chinese supply chains. With Foreign Entity of Concern (FEOC) regulations set to tighten from next year, the capacity to set up stable supply chain management (SCM) systems—including increased utilization of South Korean-made materials and components—will become a key variable.

Companies’ Strategy to Win North American Market

LG Energy Solution can enhance its customer service by broadening its ESS battery portfolio from its traditional pouch-type focus to include prismatic formats. Samsung SDI’s strategy is to extend its accumulated production experience in prismatic products into the LFP market. As for SK On, it is closing the gap swiftly as a late entrant by securing long-term supply volumes, starting with the NeoVolta contract.

An industry source commented, \”If Tesla-driven ESS cell supply continues, it will enable LG Energy Solution to build out its large-format prismatic cell portfolio and give Samsung SDI the opportunity to stably mass-produce LFP battery cells.\” The source added, \”With FEOC regulations driving ever-increasing demand for non-Chinese batteries, how quickly companies can achieve mass production and supply will be the key to expanding in the North American market.\”