New 2 trillion won deal signals the Korean battery maker’s expansion beyond luxury models, as Mercedes diversifies supply chains amid tightening EU regulations
LG Energy Solution has secured a new battery supply agreement worth 2 trillion won ($1.4 billion) with Mercedes-Benz, marking a strategic turning point in their long-running partnership. Industry officials believe the latest deal will help the German automaker’s growing lineup of midpriced electric vehicles, enabling LG Energy Solution to expand its reach beyond high-end models and strengthen its competitiveness against Chinese rivals.
According to a regulatory filing, the contract represents about 8 percent of LG Energy Solution’s annual revenue and covers deliveries to Europe and North America from March 2028 to June 2035. Although specific battery volumes and chemistries remain undisclosed, analysts expect the supply to include approximately 15–20 gigawatt-hours of lithium iron phosphate (LFP) batteries — a cost-efficient chemistry increasingly used in mass-market EVs.
Expanding From Luxury to Mass-Market EVs
The new deal is the fourth major supply agreement between LG Energy Solution and Mercedes-Benz in two years. Their partnership, once limited to the early EQC model, has evolved into a multi-billion-won collaboration across segments.
Recent contracts include:
- A 50.5 GWh deal signed last year worth about 6 trillion won
- Two agreements in September totaling 107 GWh, valued around 15 trillion won
These earlier deals focused on 46-millimeter high-energy-density cylindrical cells for premium EVs launching between 2028 and 2038. The technology can boost driving range by up to 20 percent and was considered a milestone for LG Energy Solution, as Mercedes had traditionally leaned toward Chinese suppliers such as CATL and Farasis Energy.
The new volume for midpriced EVs indicates LG Energy Solution is moving further into the mainstream EV market — a space historically dominated by Chinese players due to their cost advantages.
Mercedes’ Broad EV Push Requires Supply Chain Diversification
Mercedes-Benz recently announced plans to launch more than 40 new EV models by 2027, covering everything from entry-level compact cars to high-performance luxury vehicles. To support this strategy, the automaker has been widening its battery supplier base across regions.
A growing portion of that diversification is driven by geopolitics and regulatory pressure. A senior researcher at a major Korean battery manufacturer noted that European carmakers are increasingly wary of overdependence on China.
“European OEMs cannot afford heightened geopolitical risks. Relying too heavily on Chinese suppliers creates uncertainty,” the researcher said.
Starting early next year, the European Union will enforce stricter carbon-footprint standards for electric vehicle batteries. Under these rules, suppliers must calculate and disclose emissions generated throughout the full life cycle — from raw material extraction and production to transportation and end-of-life processing. Batteries that fail to meet the required emission limits could be restricted from entering the EU market. Analysts note that Chinese manufacturers are particularly vulnerable, given that much of their supply chain depends on coal-intensive energy sources.
No Additional Factories Needed for the New Contract
The newly secured 1–2 trillion won volume is not expected to require new production lines. Industry sources say LG Energy Solution can fulfill the order using existing facilities in the United States and Poland, giving the firm operational flexibility and reducing capital burden.
This efficiency is increasingly important as global demand fluctuates and battery makers balance multiple long-term contracts with shifting regulatory landscapes.
A Broadening Battery Portfolio for Midrange Models
Although LG Energy Solution has not confirmed the exact cell types it will supply for Mercedes-Benz’s midmarket EVs, analysts expect a combination of nickel-cobalt-manganese (NCM) cells with moderate nickel levels and LFP products. The company is already preparing to expand its mid-nickel high-voltage offerings and LFP lineup, offering automakers more flexibility for balancing performance, cost and regulatory compliance.
An LG Group official commented on the evolving collaboration:
“Our partnership with Mercedes-Benz is expanding across our vehicle components businesses. We expect cooperation to grow further across the full electric vehicle ecosystem, including batteries.”
Stronger Earnings Despite a Competitive Market
The partnership expansion comes as LG Energy Solution improves its financial stability. The company posted revenue of 5.7 trillion won ($3.89 billion) and an operating profit of 601.3 billion won in the third quarter — its second consecutive profitable quarter even without U.S. IRA tax credits. Executives attribute this to next-generation battery contracts with automakers and rising demand for energy storage systems.
Fierce Competition With China Continues
Despite its recent momentum, LG Energy Solution and other Korean battery makers face an intensifying competitive landscape. Data from SNE Research shows Korea’s top three suppliers saw their combined market share fall to 37.6 percent from January to November 2025, down 6.3 percentage points year-on-year. In the same period, China’s CATL increased its share to 29.2 percent, while BYD climbed to 7.6 percent.
Analysts say the latest Mercedes deal is critical for LG Energy Solution as it seeks to defend its global position and counter rapid expansion by Chinese firms, especially in the mass-market EV battery segment.
