Samsung and Tesla Near $2.1 Billion Deal for US-Made Batteries

Samsung SDI is in advanced talks with Tesla for a major battery supply agreement. The deal would see the South Korean firm supply 10 gigawatt-hours of batteries for Tesla’s energy storage systems. This news follows a recent multi-billion dollar chipmaking deal between Samsung Foundry and the electric vehicle maker.

The potential agreement is valued at approximately $2.11 billion. It would unfold over a three-year period. According to Reuters, the discussions are progressing positively, signaling a significant expansion of the two companies’ partnership.

Strategic Shift to US Manufacturing and LFP Technology

Samsung SDI plans to manufacture these batteries at its factory in Indiana. This facility was originally established through a joint venture with Stellantis. The move represents a strategic pivot to utilize existing capacity for a new, high-demand customer.

The batteries will use lithium phosphate (LFP) chemistry. LFP batteries are known for their stability, long life, and lower cost. They are increasingly favored for large-scale energy storage solutions like Tesla’s Megapack.

Broader Implications for Supply Chains and Markets

This deal would help Tesla diversify its battery supply chain. It reduces the company’s reliance on manufacturers based in China. A more geographically diverse supply chain is a key goal for many US companies.

The news immediately impacted financial markets. Samsung SDI’s share price jumped as much as 8.4% following the reports. This surge highlights investor confidence in the strategic importance of the potential partnership for Samsung’s battery division.

This potential $2.1 billion deal underscores the deepening partnership between Samsung and Tesla. It highlights a strategic move towards localized US production for critical components. The Tesla Samsung battery deal could reshape supply chains for years to come.

Info at your fingertips

What type of batteries is Samsung supplying to Tesla?

Samsung SDI is set to supply lithium phosphate (LFP) batteries. This chemistry is particularly well-suited for large-scale energy storage due to its safety and longevity. It is a different technology from what is commonly used in many electric vehicles.

Where will these batteries be manufactured?

The batteries are planned for production at Samsung’s factory in Indiana. This facility was built as part of a joint venture with Stellantis. Utilizing this existing plant allows for a faster production ramp-up.

What is the total value and duration of this deal?

The potential agreement is valued at around $2.11 billion. It is structured to supply 10 gigawatt-hours of battery capacity. This supply would be delivered over a three-year timeframe.

What will Tesla use these batteries for?

Tesla is expected to use these batteries primarily for its Megapack energy storage systems. The Megapack is a utility-scale product designed for large commercial and grid-level energy storage. This supports the expansion of renewable energy infrastructure.

Why is this deal significant for Tesla’s supply chain?

This agreement is significant as it diversifies Tesla’s battery sourcing. It reduces dependence on supply chains originating from China. Securing a US-based supplier for key components is a major strategic advantage.