Tesla in talks on $2.1B Samsung SDI battery deal for energy storage

Tesla secures $2.11 billion battery deal

Tesla is in advanced talks with Samsung SDI on a multi-year ESS battery supply agreement, reportedly worth approximately ₩3 trillion ($2.11 billion); both companies state that the final terms haven’t been decided.

This contract focuses on the supply of batteries for Tesla’s Energy Storage System (ESS) products. Reports describe a multi-year ESS supply starting as early as 2026, but the parties haven’t disclosed final timing.

Record 12.5 GWh storage deployment

Since this new supply is for energy products, the new battery cells from Samsung SDI will support the rapid growth of Tesla’s energy division, which is outpacing the electric car market.

The company’s ESS products, such as the Megapack for power grids, achieved a record deployment of 12.5 GWh (gigawatt-hours) in the third quarter of 2025. This massive number shows the critical need for new battery suppliers. This deployment alone surpassed the 11.4 GWh deployed in the previous record quarter 2024.

Boosting total capacity to 43.5 GWh

Securing this deal is also essential following the record quarterly deployment because Tesla is rapidly increasing its total energy storage capacity. The company’s total deployed energy storage capacity reached a new high of 43.5 GWh over the 12 months ending in Q3 2025.

This figure represents an 84% annual increase, illustrating the rapid growth of the energy market. The new batteries from Samsung SDI are crucial for keeping up this pace of development beyond the 40 GWh mark.

Supply up to 10 GWh of new cells

To help achieve this growing capacity, the new 3-year supply contract is expected to provide Tesla with a significant addition of up to 10 GWh (gigawatt-hours) of battery cells annually.

Considerable energy storage is dedicated solely to the energy products, not the vehicle side. Next-gen Megapack 3 is 5 MWh (announced Sept 2025) with deliveries targeted for H2 2026; today’s shipping Megapack 2 XL is 3.9 MWh.

Plans for 30 GWh US factory capacity

In addition to the large supply volume, a crucial part of this partnership involves plans to manufacture the batteries in the United States. Samsung SDI aims to expand its total U.S. Energy Storage System battery production capacity to 30 GWh by the end of 2026.

This capacity will be built at their Indiana joint venture factory, which focuses on producing electric vehicle batteries for other automakers, such as Stellantis. Converting some of the existing EV battery lines to ESS production speeds up the process.

LFP cells’ role in a 130% market surge

The batteries supplied are expected to be the safer and lower-cost Lithium Iron Phosphate (LFP) cells. According to company reports, the Deployments rose 81% YoY in Q3 2025 and 84% on a trailing 12-month basis.

LFP chemistry is preferred for large grid projects because it is more durable than some electric car batteries in frequent charging cycles. Tesla Energy surpassed 30% margin in Q2 2025 and recorded another profitable quarter in Q3 2025.

Another major supplier joins the network

Besides the Samsung deal, the company has secured supply from other sources to reduce risk and increase battery availability. Tesla also signed a significant agreement with another major South Korean supplier, LG Energy Solution (LGES), for LFP battery cells.

The LGES deal, reported in July 2025, is valued at $4.3 billion over 3 years. Securing supply from multiple top global battery manufacturers reduces the risk of production halting if one supplier encounters issues.

Total $6.41 billion in new battery deals

With the additional LGES contract, the combined value of the new supply deals with Samsung SDI and LG Energy Solution reaches over $6.41 billion in reported battery orders.

These massive deals show the growing importance of Tesla’s Energy division. This heavy investment in Energy Storage System (ESS) battery supply is necessary because the U.S. market alone for ESS is expected to grow from 80 GWh in 2025 to 130 GWh by 2030.

US-based battery capacity expansion

The shift to using South Korean suppliers in conjunction with U.S. manufacturing plans has a significant impact on the American electric vehicle and energy industries. The factories being built or converted in the U.S. will help provide a stable source of batteries.

By the end of 2026, the combined U.S. battery production capacity of Korean suppliers for ESS and EV use is projected to exceed 50 GWh annually. This local production reduces shipping costs and limits exposure to foreign tariffs.

LFP cells versus standard EV batteries

The Lithium Iron Phosphate (LFP) cells from this deal differ from the nickel-based cells often used in premium Tesla cars. LFP cells are heavier and have a lower energy density, which is not ideal for making a long-range Model S.

However, they are safer, cheaper, and last longer when charged and discharged many times. This makes LFP the better, more cost-effective choice for a stationary product like the Megapack that needs to run for 15 years or more.

Samsung SDI’s focus shifts from car batteries

Securing this large contract for Samsung SDI helps the company diversify its business from a slump in the global electric vehicle market. In the first half of 2025, Samsung SDI saw an 8.8% decline in the energy of its batteries used in worldwide electric cars.

The company is creating a new, strong area of growth by selling a massive volume of LFP cells to Tesla for energy storage. This ESS market is booming thanks to high power demands from new AI data centers.

Want to know how many miles you can expect from a Tesla battery? Get the facts on how long Tesla batteries last.

Future Megapack 4 and AI data centers

This guaranteed supply of 10 GWh of cells annually helps Tesla prepare for the future. The company is already working on the next generation of its grid storage product, the Megapack 4.

Tesla introduced the Megapack 3 and a new Megablock platform; Tesla claims that Megablock reduces construction costs by up to 40% and installs 23% faster.

The demand for these large systems is rising sharply because major tech companies are rapidly building massive AI data centers that need reliable battery backup power.

Curious which electric SUV is the better buy? Compare the details in Tesla Model Y vs. Ford Mustang Mach-E.

Think this partnership will power Tesla’s next leap? Share your take below.

Read More From This Brand:

• Nissan drops Ariya imports for 2026 model year
• The Slate electric truck will soon charge at Tesla Superchargers
• Tesla Model 3 vs. BYD Seal: What sets them apart

Don’t forget to follow us for more exclusive content right here on MSN

If you liked this story, you’ll LOVE our FREE emails. Join today and be the first to get stories like this one

This slideshow was made with AI assistance and human editing.