South Korean battery material producer L&F said on Monday that the value of its 2023 agreement to supply high-nickel cathode materials to Tesla and its affiliates has been reduced sharply to $7,386 from an earlier projection of $2.9 billion. The original contract covered deliveries for Tesla’s in-house 4680 battery cells from January 2024 through December 2025. L&F did not provide further details on the cause of the revision.
Analysts and industry sources point to slower electric vehicle demand and challenges in ramping up production of the 4680 cells as key factors. Tesla has faced difficulties achieving targeted yields for its 4680 format and has acknowledged that scaling its new dry-electrode manufacturing process presents significant hurdles. To date, these batteries are used primarily in the Cybertruck, which has underperformed initial sales forecasts.
Cho Hyun-ryul, a senior analyst at Samsung Securities, noted that both production yield issues and a broader slowdown in EV market growth likely contributed to the reduced order volume from L&F. “There is anxiety about the battery sector overall,” he said.
The announcement comes amid growing pressure on South Korea’s battery industry. Several suppliers have reported order cancellations and scaled-back partnerships with U.S. automakers following the expiration of federal EV tax credits in September. For example, LG Energy Solution expects to forfeit roughly 13.5 trillion won ($9.41 billion) in revenue after supply agreements with Ford and Freudenberg Battery Power Systems were terminated, representing more than half of its 2024 revenue. SK On also recently decided to end its joint venture with Ford for U.S. battery plants.
Ford itself announced a $19.5 billion writedown and the cancellation of multiple EV models, citing policy shifts and waning demand. As automakers reassess their electric vehicle strategies, materials suppliers like L&F are adjusting to a more cautious market outlook.
Source: Reuters
