Due to the delay of the Cybertruck project and Tesla's adjustment in production strategy, the contract for high-nickel cathode materials worth 3.83 trillion Korean won signed with its supplier, South Korea's L&F Company, has been reduced to just 9.73 million Korean won, shrinking by approximately 99%. This material was originally intended for use in Cybertruck batteries, but the postponement of the model and a shift in consumer preferences have led to a sharp decline in actual demand. Additionally, policy changes such as the Inflation Reduction Act have also impacted Tesla's procurement plans.
$Tesla (TSLA.US)$ The continued delays in the Cybertruck project have impacted its supply chain. South Korean battery materials supplier L&F disclosed on Monday that its supply contract with Tesla, signed in February 2023 for 3.83 trillion Korean won, has been significantly reduced to 9.73 million Korean won, representing a 99% decrease in the contract value due to changes in the supply volume.
On December 29, according to Bloomberg citing sources familiar with the matter, this batch of high-nickel cathode materials was originally planned for use in Cybertruck batteries, with the supply period from January 2024 to this month. However, due to repeated delays in the development of this model and consumers shifting towards other models such as the Model 3 sedan and Model Y SUV, L&F Company's actual supply volume has been very limited.
Year-to-date, L&F's stock price has risen over 36%, lagging behind the 76% increase of the KOSPI (Korea Composite Stock Price Index).
Dual Pressures of Policy and Market
The company originally planned to supply Tesla with high-nickel cathode materials over the next two years; these materials are a key component in enhancing battery energy density. In a statement, L&F noted that due to changes in the global electric vehicle market and battery supply conditions, adjustments to production plans were necessary, making this contract revision unavoidable.
The company emphasized that there has been no change in the shipment volume or customer supply of its flagship high-nickel products, and shipments to major South Korean battery manufacturers, including LG Energy Solution, are proceeding smoothly. Sources further indicated that this contract adjustment was not only influenced by product development progress but also significantly affected by broader policy and macroeconomic factors, including changes in subsidy policies under the Inflation Reduction Act.
Editor/Doris