Tesla's $2.1 Billion Bet: Why Samsung SDI Deal Signals Major Supply Shift

According to the report on Tuesday, executives from Tesla's ESS division visited Korea last week and reached near-final terms with Samsung SDI on a multi-year supply contract. The deal would cover approximately 10 gigawatt-hours of lithium-iron-phosphate battery cells per year, starting as early as 2026, generating an estimated annual revenue of 1 trillion to 1.5 trillion won for Samsung SDI.

Tesla CEO, Elon Musk, said on X, "Slightly different versions of the Tesla AI5 chip will be made at TSMC and Samsung simply because they translate designs to physical form differently, but the goal is that our AI software works identically. We will have samples and maybe a small number of units in 2026, but high volume production is only possible in 2027. AI6 will use the same fabs, but achieve roughly 2X performance. Aiming for a fast follow to AI5, so hopefully mid 2028 for volume production of AI6. AI7 will need different fabs, as it is more adventurous."

The Korean battery maker is expected to produce the cells at its joint venture with Stellantis in Indiana, converting part of the facility's existing EV battery lines into ESS-dedicated production for North American clients, including Tesla.

"The reported deal likely involves cell-level supply for Tesla's Megapack assembly lines in California," the report quoted an industry source. "Tesla is expected to integrate the cells into its own Megapack ESS products."

Samsung SDI's domestic rival, LG Energy Solution, which signed a contract in July to supply Tesla with 20 GWh of LFP ESS battery cells annually, according to the report, is negotiating to raise that volume by 50 per cent to 30 GWh. If both deals proceed, the combined Korean supply of cells to Tesla could reach 40 GWh per year.

"The company later confirmed discussions were ongoing but said 'no details have been finalized.' Industry observers say the potential Tesla contract would give Samsung SDI a much-needed boost after recent financial headwinds. In the third quarter, the company's revenue fell 22.5 per cent on-year to 3.5 trillion won, and it swung to an operating loss of 591.3 billion won," the report said.

Unlike LG Energy Solution and SK On, which operate independent plants in the US, Samsung SDI currently relies on its joint venture with Stellantis for North American output. The report indicates the Indiana plant's utilization rate remains below 50 per cent due to the EV market downturn.

"Securing a major client like Tesla in the fast-growing ESS market marks a significant milestone for Samsung SDI," the report quoted Lee Ho-geun, a car engineering professor at Daeduk University. "A long-term partnership will enhance its credibility and help expand its complete ESS solution lineup, including products such as the Samsung Battery Box in the US."

Tesla's pivot toward Korean suppliers follows its effort to diversify away from CATL, a Chinese battery maker that had supplied most of its cost-effective ESS battery cells.

The report also stated that, "The Nevada plant, with an annual capacity of 10 GWh, incorporates CATL's design and equipment but will cover only a fraction of Tesla's ESS needs. The company plans to scale total annual ESS capacity to 100 GWh within three years, meaning its current 50 GWh supply from in-house and Korean partners still meets only half that target."

"With US tariffs factored in, Korean-made LFP cells could achieve cost parity or even a price advantage over Chinese supplies," the report quoted another industry insider.

- ANI