Tesla is reportedly continuing to reduce its reliance on China, largely through avoiding the effects of tariffs. On Wednesday, the EV giant reportedly a $4.3 billion contract with South Korea-based LG Energy Solution for lithium iron phosphate, or LFP, batteries to be used in energy storage systems over three years.
LG Energy Solution on Wednesday said it signed the $4.3 billion contract to supply LFP batteries with the deal running from August 2027 to July 2030 and includes an option to increase the volume and extend the duration for up to seven years. However, LG Energy did not identify the client.
News reports then emerged early Wednesday that Tesla was the client as the Elon Musk company looks to reduce Chinese imports due to the steep tariffs imposed by President Donald Trump. The lithium iron phosphate batteries will be supplied to Tesla from LG Energy's U.S. factory in Michigan, according to Reuters.
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LG Energy already supplies batteries to Tesla and General Motors.
Tesla's decision to contract with LG Energy for LFP batteries comes just days after Musk confirmed Tesla signed a $16.5 billion multiyear deal with fellow South Korea-based company Samsung for AI chips.
Samsung's new Texas fab facility will be "dedicated to making Tesla's next-generation AI6 chip," according to Musk, with the aim of using the new memory chips for Tesla's humanoid robot Optimus, fully autonomous self-driving vehicles and AI data centers.
Musk and Tesla's decision to cut deals with South Korean companies comes as the country is looking to reach a trade deal with Trump before Aug. 1. South Korea faces 25% tariffs.
Tesla Stock Trend
TSLA shares dropped 0.7% to 319.04 during Wednesday's stock market after falling around 1.4% to 321.20 on Tuesday.
Last week, TSLA undercut its 50-day and 200-day moving averages, but narrowed the gap on Friday. Musk warned of a "few rough quarters" ahead in the Q2 conference call.
Tesla stock is still in a new base with a traditional 367.71 buy point, according to MarketSurge chart analysis. That base is within a much-larger consolidation.
On Tuesday, RBC Capital raised the firm's price target on TSLA to 325 from 319, writing that Tesla's valuation could far exceed current levels should it be successful on all of its goals. The analysts noted that regulatory hurdles remain for the company's robotaxi ride-hailing service and that high levels of used EV inventory along with the Biden-era EV tax credit going away should pressure the auto business for the next several quarters.
The stock rallied from late April to late May in part because Musk said he was backing away from politics and the Trump administration. Since then, Tesla stock has tumbled and rebounded according to news cycles — many generated by debate between Musk and Trump.
The stock initially soared after the robotaxi launch but Tesla stock closed Tuesday down less than 1% since the June 22 service release.
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At Wednesday's stock market close, Tesla stock was up 34% since the April 22 Q1 conference call, lifted by robotaxi bets. Shares are down about 21% for the year, and 35% below their all-time high of 488.54.
Tesla stock has a 21-day average true range of 4.17%. The ATR metric, available on IBD's MarketSurge charting tool, gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily stock market action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
Investors can keep tabs on the IBD Leaderboard watchlist, the IBD 50 list of top growth stocks and IBD SwingTrader along with the IBD Sector Leaders list.
Tesla stock has a 57 Composite Rating out of a best-possible 99. The stock also has a 76 Relative Strength Rating and a 56 EPS Rating.
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