Tesla has reportedly locked in a USD 2.11 billion battery supply agreement with South Korea's Samsung SDI, according to the Korea Economic Daily. The deal, spanning three years, focuses exclusively on Energy Storage System batteries and would make Samsung SDI Tesla's second major battery supplier outside China.

The Korea Economic Daily broke the news Monday morning, citing an unnamed source from the battery industry. Samsung SDI will provide Tesla with batteries for ESS at 10 GWh per year. The batteries are intended for Tesla's energy storage products, such as Megapack and Powerwall units, not for electric vehicles.

Company Responses and Deal Status

Samsung SDI pushed back on the report, stating that nothing has been finalized yet and that discussions are ongoing, but no final contract has been signed. Tesla has not responded to requests for comment regarding the reported agreement.

The deal would give Tesla supply chain stability by adding a second major battery supplier outside Chinese manufacturers. Currently, CATL supplies most of Tesla's batteries. Samsung SDI will begin supplying batteries from 2024 onward, according to the Korea Economic Daily report.

Samsung SDI plans to convert some of its LFP battery factory lines, which were jointly established with Stellantis in the U.S. and Indiana, for ESS production. The company brings serious credentials to the table, making high-density lithium-ion cells with strong safety ratings and already supplying batteries to BMW, Stellantis, and Rivian.

Tesla's Energy Storage Growth

Tesla's energy division has been experiencing record deployments in the past year, with quarterly reports showing significant growth. Megapack installations are growing faster than EV deliveries, representing a key area of expansion for the company.

CEO Elon Musk has stated that Tesla Energy could eventually surpass the car business in importance. The company already operates large-scale battery systems in Australia, the UK, and across the United States, with several countries signing long-term contracts, including Australia, Japan, Ireland, and California for Tesla battery farms.

Tesla manufactures three main energy products. Powerwall handles home storage for residential customers, Powerpack serves commercial customers, and Megapack tackles utility-scale grid storage for governments and power companies. The Samsung deal would help Tesla ramp up production at two facilities, one Megafactory in California and another that recently opened in Shanghai.

Market Impact and Industry Context

Both Tesla and Samsung SDI stock prices moved higher following the reported agreement. The deal positions Tesla to scale up energy storage deployments as global demand for grid-scale batteries continues climbing, with countries shifting toward renewable power.

The International Energy Agency says the world needs 50 times more grid battery capacity by 2040 to hit net-zero emissions. Battery storage addresses the challenge that solar panels don't work at night and wind turbines need actual wind to spin, creating gaps that energy storage can fill.

Samsung SDI is also working on next-generation solid-state batteries that could eventually replace current lithium-ion technology. Adding Tesla to its roster of clients, which includes BMW, Stellantis, and Rivian, represents a significant win for the South Korean battery manufacturer.

For investors, the agreement means Tesla gains supply chain stability with a second major supplier while Samsung SDI secures steady revenue from one of the world's biggest energy companies. The deal supports Tesla's strategy to dominate energy storage, as it has done in the electric vehicle market.

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