Tesla has signed asupply agreementto build a $4.3 billion battery cell manufacturing plant, according to the U.S. government.

That should mean more growth and lower costs for its battery storage business.

The Elon Musk-led electric-vehicle maker and South Korea’s LG Energy Solution will build a lithium iron phosphate (LFP) prismatic battery cell manufacturing facility in Lansing, Michigan, launching production in 2027, the Interior Department said on Monday.

LFP batteries offer a more cost-effective alternative to traditional cobalt-based batteries.

LG Energy shares rose 4% on Tuesday. Tesla stock slipped 0.2% ahead of the opening bell. S&P 500 and Dow Jones Industrial Average futures were both down about 0.2% amid concern about another oil price rally.

“American-made cells will power Tesla’s Megapack 3 energy storage systems produced in Houston, creating a robust domestic battery supply chain,” according to the news release.

Megapacks are huge blocks of batteries sold to utilities that can be paired with renewable energy to store power when wind isn’t blowing or the sun isn’t shining. They help with load balancing and grid efficiency, potentially eliminating the need for costly “peaker” plants that run only when demand is highest.

The Michigan-made battery cells will be sent to Houston, where Tesla will use them in their stationary storage business.

Tesla’s utility business is significant, generating 2025 sales of about $12.7 billion, or 13% of total revenue, and accounting for more than 20% of Tesla’s gross profits.

Tesla deployed 46.7 gigawatts of battery storage in 2025, up almost 50% year over year.

The new supply relationship brings more battery manufacturing into the U.S., reducing reliance on China. Tesla relies on internal production, Panasonic, and China’sContemporary Amperex Technology, better known as CATL, for its battery supply.

More growth in battery storage is a positive for shares that could do with a boost. They’ve tumbled 19% over the past three months, sliding amid worries about a slump in sales, weaker profit, and tighter margins. The S&P 500 is down 1.7% over the same period.