SEOUL | Dec 29 (GeokHub) South Korean battery materials maker L&F said on Monday that the value of its supply agreement with Tesla has fallen sharply, shrinking to just $7,386 from an earlier estimate of $2.9 billion, underscoring mounting pressure across the global electric vehicle supply chain.
L&F disclosed the revision without explaining the reason for the drastic reduction. The company had announced in 2023 that it would supply high-nickel cathode materials to Tesla and its affiliates from January 2024 through December 2025.
Industry sources and analysts previously said L&F was expected to provide key materials for Tesla’s in-house 4680 battery cells, which Elon Musk once positioned as a cornerstone of Tesla’s next-generation electric vehicles.
TESLA’S 4680 SETBACKS
Musk unveiled the 4680 battery in 2020, describing it as a lower-cost, high-performance cell that would enable a fully autonomous $25,000 electric car within a few years.
However, analysts say Tesla’s slower-than-expected progress in scaling production of the 4680 cells — combined with cooling global EV demand — sharply reduced the automaker’s need for cathode materials from suppliers like L&F.
Tesla currently uses the 4680 batteries primarily in its Cybertruck, which has posted weak sales despite Musk’s earlier projections of hundreds of thousands of annual deliveries.
Musk has also acknowledged challenges in scaling Tesla’s dry-electrode battery process, a key manufacturing technique behind the 4680 cells.
Neither Tesla nor L&F immediately responded to Reuters’ requests for comment.
EV DEMAND SLOWS, ORDERS CUT
Cho Hyun-ryul, a senior analyst at Samsung Securities, said issues with battery production yields and slowing EV demand growth likely contributed to the sharp reduction in orders.
“There is growing anxiety about the battery sector overall,” Cho said.
Across the industry, battery suppliers have reported order cancellations and downsized joint ventures following the end of U.S. federal EV subsidies in September and increasing policy uncertainty.
South Korea’s battery industry has come under particular strain. LG Energy Solution has warned it will lose about 13.5 trillion won ($9.41 billion) in expected revenue after supply deals with Ford and Freudenberg Battery Power Systems were terminated.
Meanwhile, SK On said earlier this month it would end its joint venture with Ford for battery plants in the United States.
Ford has announced a $19.5 billion writedown and scrapped several electric vehicle models, highlighting a broader retreat by automakers from aggressive EV expansion amid weaker demand and shifting U.S. policy under President Donald Trump.
