Samsung SDI Eyes Major ESS Battery Deal with Tesla

Samsung SDI is pursuing a large-scale supply of energy storage system (ESS) batteries to Tesla, the American electric vehicle company, raising the prospect of collaboration between the two companies.

Samsung SDI is reportedly in discussions to supply Tesla with a significant quantity of ESS batteries for at least three years. While the specific supply volume and timeline are yet to be finalized, it is anticipated that Samsung SDI will play a crucial role in Tesla's ESS market expansion if the two parties reach an agreement.

This potential agreement is believed to have originated from Tesla's efforts to broaden its supply chain beyond China. During its first-quarter earnings call, Tesla mentioned its commitment to securing additional supply chains from vendors outside of China. This reflects Tesla's strategy to reduce dependence on specific countries and diversify its supply network.

Tesla's move is interpreted as a strategic decision to mitigate geopolitical risks and ensure a stable battery supply by reducing reliance on single suppliers. Energy storage systems (ESS) play a vital role in enhancing the stability of power grids by storing energy when demand is low and releasing it when demand is high. They are particularly essential for improving the efficiency of renewable energy sources, such as solar and wind power, which have variable generation outputs.

Samsung SDI reportedly plans to manufacture the ESS batteries for Tesla at its joint venture factory under construction in Indiana, USA. The Indiana plant is a strategic project for Samsung SDI to target the US market. The batteries produced at this facility are expected to play a crucial role in rapidly meeting the ESS demand within the United States. Samsung SDI aims to strengthen its competitiveness in the US market and expand its ESS battery market share through the Indiana plant.

However, a Samsung SDI official cautiously stated, "There are no confirmed details regarding the ESS battery supply agreement with Tesla." While discussions are underway, further negotiations are expected before a final contract can be signed. Battery industry experts predict that "a collaboration between Tesla and Samsung SDI, if realized, will have a significant impact on the global ESS market."

ESS is a system that stores electricity generated by power plants and supplies it when needed. It is considered a core facility for compensating for the intermittency of renewable energy sources such as solar and wind power and contributing to power grid stabilization. The ESS market is growing rapidly worldwide due to the recent expansion of renewable energy deployment. According to market research firm SNE Research, the global ESS market is expected to reach $54 billion in 2025.

If Samsung SDI supplies ESS batteries to Tesla, it is expected to strengthen its position in the rapidly growing ESS market. Furthermore, collaboration with Tesla is projected to positively impact the company's technological competitiveness and expansion of its global market share. Samsung SDI's strategy is to lead the market with its ESS battery technology, which offers high energy density, long lifespan, and high safety.

Meanwhile, in July, LG Energy Solution announced that it had signed a lithium iron phosphate (LFP) battery supply agreement worth a total of 5.9442 trillion won for three years starting in 2027, without specifically naming the contract partner. LG Energy Solution explained, "This contract includes the possibility of extending the total contract period to seven years and supplying additional quantities, subject to agreement with the customer, in addition to the supply under this contract." Lithium iron phosphate (LFP) batteries have the advantage of being price-competitive because they use inexpensive iron phosphate instead of expensive metals such as nickel and cobalt.