Mercedes-Benz secures $11B battery supply deal with LG
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Mercedes-Benz is accelerating its electric future with one of its most ambitious supply chain moves to date. The automaker signed two long-term battery cell supply contracts with LG Energy Solution valued at about $11 billion, covering 107 gigawatt-hours of capacity across Europe and the United States.
The agreements, among the largest LG has secured, give Mercedes-Benz guaranteed access to next-generation 46-series cylindrical cells well into the next decade. In an environment where battery availability can dictate production speed and market leadership, the deal reflects a broader race among automakers to secure the lifeblood of electrification.
Why automakers are racing to lock in battery supply
The global electric vehicle market is expanding rapidly, but access to reliable and competitively priced batteries has emerged as one of the most significant challenges. Analysts estimate the global battery technology sector will reach more than $431 billion by 2030, up from $252 billion in 2025, a compound annual growth rate of more than 11 percent. That growth is being driven not only by passenger EV demand but also by renewable energy storage needs.
At the same time, raw material supply chains are under pressure. Lithium, cobalt, and graphite continue to face extraction, processing, and ethical sourcing concerns. Policy frameworks in both the United States and European Union are intensifying the urgency. US tax credits and tariffs push manufacturers to localize production, while European rules mandate recycled content and transparent reporting.
Inside the Mercedes-Benz and LG Energy Solution deal
Mercedes-Benz’s agreements with LG Energy Solution span more than a decade and form a critical part of its electrification strategy. The European contract secures 32 gigawatt-hours of supply from September 2025 through the end of 2035. A larger US affiliate agreement, totaling 75 gigawatt-hours, runs from 2029 through 2037. Together, they account for 107 gigawatt-hours of capacity, one of the most significant orders in LG’s history.
The contracts focus on LG’s 46-series cylindrical cells, a format gaining traction for its efficiency and manufacturing scalability. This decision aligns with Mercedes’ shift toward standardizing cell design across models, which can lower costs and streamline assembly. The deal follows an October 2024 agreement in which LG committed to deliver 50.5 gigawatt-hours of cells to Mercedes’ US operations, signaling deeper ties between the two companies.
LG’s growing US presence will be key in fulfilling these contracts. The company is expanding its Arizona and Michigan facilities, supported by government incentives, to become one of North America’s leading suppliers by 2030.
Building a sustainable EV supply chain
While securing volume is essential, Mercedes-Benz is equally focused on building a more responsible supply chain. The company has opened a battery recycling plant in Germany with the capacity to recover enough raw materials for more than 50,000 modules annually. By closing the loop, Mercedes aims to reduce reliance on virgin materials and mitigate price volatility.
On the sourcing side, Mercedes has pledged to cut cobalt usage in new battery cells and to procure lithium and other critical minerals from audited, certified mines. This approach aligns with its Ambition 2039 sustainability plan, which targets a carbon-neutral supply chain. European regulators are tightening requirements for recycled content and traceability, making these moves not only voluntary but also increasingly necessary for compliance.
The challenge is balancing growth with responsibility. As demand rises, manufacturers must scale production without undermining environmental standards or human rights commitments. Mercedes’ investment in recycling and ethical sourcing shows recognition of that tension.
The competitive landscape of EV battery production
LG Energy Solution is one of the largest global battery producers, holding about 14 to 15 percent market share. It faces competition from Chinese leader CATL, Panasonic in Japan, and emerging Western producers. Profitability in the sector remains pressured, with LG adapting by diversifying product lines, expanding into energy storage systems, and exploring lithium iron phosphate chemistries for cost-sensitive markets.
Policy incentives are reshaping competitive dynamics. US Inflation Reduction Act credits and tariffs on imports encourage local manufacturing, while European policies push for domestic recycling and transparency. Automakers are responding by diversifying partnerships, striking deals not only with LG but also with CATL, Northvolt, and other suppliers to reduce exposure to single points of failure.
The new LG contracts reinforce Mercedes-Benz’s long-term EV strategy and its ambition to electrify its fleet. By securing access to advanced cells, the automaker is positioned to expand production in both Europe and the United States, reduce supply risks, and align with government incentives.
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