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South Korea’s L&F Slashes Value: Overview
- L&F Co Ltd (South Korea) reduces value of cathode material supply contract with Tesla from projected $2.9 billion to just $7.386 million.
- Deal originally covered materials for Tesla’s 4680 cells and other EV batteries.
- Cut attributed to slowing EV demand growth, production yield issues with 4680 batteries, and lack of scale-up.
- Part of broader industry pressure: Suppliers face cancellations from Ford, GM; LG Energy Solution loses $9.41 billion in expected revenue.
- Reflects auto sector retreat from aggressive EV plans amid US policy changes and weakening demand.
L&F Drastically Cuts Tesla Battery Deal Value: $2.9 Billion Projection Slashed to $7.386 Million
South Korea’s battery material supplier L&F Co Ltd delivered a stark illustration of the cooling electric vehicle market on December 29, 2025, announcing a massive reduction in its cathode supply contract with Tesla. The deal, once projected to be worth up to $2.9 billion, has been scaled back to a mere $7.386 million—a cut of over 99%. This dramatic revision underscores the challenges facing battery suppliers as automakers recalibrate ambitious EV plans amid slowing demand and production hurdles.
The original agreement, focused on high-nickel cathode materials for Tesla’s next-generation batteries, including the much-hyped 4680 cells, reflected high expectations from Tesla’s 2020 roadmap. CEO Elon Musk had promised the 4680 would enable affordable $25,000 fully autonomous EVs through lower costs and higher energy density. However, persistent yield issues in 4680 production, combined with softer global EV growth, meant Tesla required far less material than anticipated.
Analysts point to multiple factors behind the cut:
- 4680 ramp-up struggles: Low production yields at Tesla’s facilities limited cell output.
- Demand slowdown: Global EV sales growth cooled in 2025, reducing battery needs.
- Policy shifts: The end of US federal EV subsidies in September under the Trump administration prompted broader industry pullbacks.
Cho Hyun-ryul, senior analyst at Samsung Securities, noted, “There is anxiety about the battery sector overall,” citing yield problems and demand weakness as key drivers.
Broader Industry Pressure on Korean Suppliers
L&F’s experience is part of a wider wave hitting South Korea’s battery giants:
- LG Energy Solution faces a 13.5 trillion won ($9.41 billion) revenue loss from terminated deals with Ford and others—over half its 2024 revenue.
- SK On ended its US joint venture with Ford this month.
- Ford announced a $19.5 billion writedown and scrapped several EV models.
These cancellations follow US subsidy withdrawal and automaker retreats from aggressive electrification targets, with hybrids gaining favor amid profitability concerns.
Tesla currently uses 4680 cells primarily in the Cybertruck, which has underperformed sales expectations despite Musk’s bold predictions.
What the Deal Cut Means
The slash from billions to millions highlights:
- Over-optimism in early EV supply contracts.
- Risk exposure for suppliers tied to single OEMs.
- Market correction after years of explosive growth.
For L&F, the reduced scope frees capacity but delivers a revenue hit. For Tesla, it reflects a pragmatic scaling back of 4680 ambitions while focusing on profitable models.
The Bigger Picture: Battery Sector Faces Reality Check
South Korea’s battery industry, a global powerhouse, built capacity on forecasts of unrelenting EV demand. Now, with growth moderating and policy support waning in key markets like the US, suppliers confront overcapacity and order volatility.
The L&F-Tesla revision is symptomatic: the EV boom isn’t over, but it’s maturing into a more measured pace. Companies must navigate demand fluctuations, diversify clients, and innovate for cost/performance gains.
As 2026 approaches, the sector braces for adjustment—a necessary pause after years of breakneck expansion.
Source: reuters.com
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