Tesla has reportedly secured a massive $2.1 billion, three-year agreement with Samsung SDI for the supply of battery cells. This substantial deal is a major development in Tesla’s battery sourcing strategy, but the key detail is that these LFP (Lithium-Iron-Phosphate) cells are intended exclusively for the company’s Energy Storage System (ESS) business. The LFP cells will be powering products like the Megapack and Powerwall, and not for its electric vehicles. The agreement marks the first large-scale supply partnership between the two companies.

This move comes as Tesla’s ESS division is experiencing overwhelming demand and is currently battery supply constrained. By signing this deal, Tesla is actively working to diversify its battery suppliers. The company is seeking to lessen its reliance on Chinese suppliers like CATL and BYD, a strategy driven partly by the need to offset tariffs on Chinese-made products and secure reliable, long-term supply for its rapidly growing energy business.