Tesla’s battery supply chain has delivered an unexpected setback for one of its key partners. South Korean battery materials company L&F Co. disclosed this week that a previously announced supply agreement with Tesla has been reduced to a fraction of its original value.
The contract, first announced in February 2023 and originally valued at 3.83 trillion won (US$2.67 billion), has been slashed by roughly 99% to just 9.73 million won (US$6,700), according to a regulatory filing.
L&F said the dramatic reduction stemmed from a “change in supply quantity,” without naming specific vehicle programs. However, people familiar with the deal say the high-nickel cathode material was intended for 4680 batteries used in the Cybertruck, Tesla’s stainless-steel electric pickup. Deliveries were scheduled to run from January 2024 through December 2025, but only minimal volumes were ultimately supplied. (via Bloomberg)
The sharp pullback reflects a combination of delayed development timelines and softer-than-expected demand for the Cybertruck, currently the only Tesla vehicle utilizing the 4680 battery cells.
Broader economic and policy shifts also played a role. Sources cited the elimination of certain U.S. Inflation Reduction Act (IRA) subsidies as another factor that weighed on projected battery volumes. Across the industry, automakers and suppliers have been reassessing EV investments amid slowing growth rates, rising costs, and regulatory uncertainty.
In a statement, L&F stressed that the contract revision was driven by changing market conditions rather than product quality issues. “There have been no changes to shipments or customer supply of the company’s flagship high-nickel product,” the company said, adding that deliveries to major Korean battery cell manufacturers remain on track.
For Tesla, the development highlights how its vertically integrated battery strategy—particularly around newer formats like the 4680 cell—remains closely tied to vehicle demand. The Cybertruck was expected to be a major showcase for these cells, but scaling production has proven more difficult than initially forecast. Challenges with manufacturing yields and advanced processes, such as dry-electrode coating, have limited output and reduced material requirements.
Tesla also sold a Model Y variant with 4680 cells, but that variant was discontinued after buyers reported poor range and charging performance.
