In a dramatic turn of events, a major battery material supplier to Tesla Inc. has seen its multi-billion dollar contract with the electric vehicle giant reduced to a mere fraction of its original value. The drastic cut is linked to prolonged delays in the development of Tesla's much-hyped Cybertruck and shifting market dynamics.
A Contract Evaporates: From Billions to Thousands
South Korea's L&F Co. made a startling disclosure on Monday, revealing that its massive supply agreement with Tesla had been almost entirely scrapped. The contract, first announced with great fanfare in February 2023, was originally valued at a staggering 3.83 trillion won (approximately $2.8 billion). It has now been reduced to a paltry 9.73 million won (about $7,400), marking a reduction of over 99%. In a regulatory filing, L&F stated the reason for this unprecedented cut was simply a "change in supply quantity."
The Cybertruck Connection and Market Shifts
According to a person familiar with the sensitive business dealings, the high-nickel cathode material L&F was contracted to supply from January 2024 through December 2025 was specifically intended for the batteries of Tesla's angular Cybertruck. The source, who requested anonymity, explained that scant material was delivered because the vehicle's development timeline was repeatedly pushed back. Furthermore, consumer preference shifted towards Tesla's more established models like the Model 3 sedan and Model Y SUV.
The person added that broader economic policies also played a significant role. The elimination of certain Inflation Reduction Act (IRA) subsidies in the United States affected the contract's viability. Tesla representatives did not respond to requests for comment on the matter.
Fallout and Future Outlook
L&F attempted to downplay the impact in a separate statement, calling the contract revision "inevitable" due to adjustments in the global EV market and battery supply conditions. The company stressed that shipments of its flagship high-nickel product to major Korean cell manufacturers, including LG Energy Solution Ltd., are proceeding smoothly and were unaffected.
However, the market reaction was swift and severe. Shares of L&F plummeted by 11% in Seoul trading on Tuesday. While the stock has gained around 16% this year, this performance significantly trails the benchmark Kospi Index's impressive 76% surge, highlighting investor concern over the lost Tesla business.
This incident underscores the volatile nature of the electric vehicle supply chain, where long-term contracts can be upended by product delays, consumer trends, and sudden policy changes. It serves as a cautionary tale for suppliers banking on the ambitious timelines of automakers.
