Tesla's Battery Supply Shake-Up: L&F Deal Collapses from $2.9B to Near-Zero as EV Demand Stumbles

MevHunter · 2025-12-31T15:30:25+00:00

South Korea's battery materials sector is in turmoil after L&F drastically reduced its Tesla supply contract from $2.9 billion to just $7,386, reflecting broader challenges in EV demand and production inefficiencies amid an industry-wide crisis.

MevHunter

2025-12-31 15:30:25

Abstract generation in progress

South Korea’s battery materials sector is facing a dramatic reckoning as one of its biggest suppliers drastically downsizes its Tesla commitment. L&F has slashed its battery component supply contract to just $7,386—a stunning collapse from the originally projected $2.9 billion when the agreement was first announced in 2023.

The Contract Carnage Behind Tesla’s 4680 Troubles

The agreement called for L&F to provide high-nickel cathode materials throughout 2024-2025, primarily intended for Tesla’s proprietary 4680 battery cells. However, the company has offered no public explanation for this extraordinary reduction. Industry observers attribute the plunge to Tesla’s failure to scale up 4680 production as anticipated, combined with lackluster electric vehicle demand across the market. The Cybertruck, Tesla’s flagship platform set to utilize these battery cells, has fallen short of sales projections, while the company continues wrestling with the technical complexities of its dry electrode manufacturing process.

A Broader Industry Bloodbath

L&F’s contract renegotiation signals a wider crisis engulfing South Korea’s battery supply ecosystem. Production inefficiencies and the deceleration in EV adoption have prompted major automakers to trim or eliminate battery orders entirely. The withdrawal of U.S. federal EV incentives in September triggered a wave of cancellations and joint venture closures. LG Energy Solution faces approximately 13.5 trillion won in lost revenue following Ford and Freudenberg’s termination of their supply arrangements, while SK On has shuttered its American battery partnership with Ford. Ford’s own $19.5 billion writedown and decision to discontinue multiple EV programs demonstrate the sector-wide retreat from electric vehicle investments.

Market Reaction

Tesla’s stock reflected mounting concerns, with TSLA closing Monday at $459.64, representing a 3.27% decline. After-hours trading pushed the price slightly lower to $458.34, a 0.28% drop on Nasdaq, as investors digest the deteriorating battery supply landscape and broader EV headwinds.

Disclaimer: This analysis represents commentary on reported market developments and should not be construed as investment advice.

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.