Tesla’s Cybertruck program is causing a ripple effect throughout its supply chain, with one key battery materials supplier drastically reducing a previously massive agreement. According to a report from GuruFocus, South Korean battery materials firm L&F has slashed the value of a long-term supply contract tied to Tesla by roughly 99%, following delays and shifting expectations around the Cybertruck.
Initially announced in February 2023, the contract was valued at 3.83 trillion won (approximately $2.67 billion USD). However, it has now been revised down to just 9.73 million won, or roughly $6,800 USD. The agreement was for high-nickel cathode materials expected to be supplied between January 2024 and December 2025, specifically for Cybertruck batteries.
Originally seen as a significant win for both parties, with Tesla securing critical materials for its ambitious production targets, the dynamics have changed. Actual shipments were limited due to repeated delays in Cybertruck development, with some buyers opting for higher-volume models like the Model 3 and Model Y instead. Additionally, broader policy and economic factors, such as the removal of Inflation Reduction Act subsidies, have impacted final supply volumes.
While Tesla has started Cybertruck deliveries in South Korea, the global rollout has been slow, with the vehicle still unavailable in Europe. The company also recently discontinued its cheapest Cybertruck model in the U.S., reflecting softer-than-expected demand.
L&F stated that the contract revision was necessary due to changes in the global EV market and battery supply conditions. Despite this, shipments of its high-nickel products to other customers remain unaffected. However, the announcement led to a more than 6% drop in L&F shares in Seoul trading.
This sharp reduction highlights how quickly plans around the Cybertruck can shift for Tesla, impacting suppliers as production timelines and demand assumptions are reassessed. It underlines the complex and interconnected nature of the electric vehicle industry, where changes in one part of the supply chain can have far-reaching consequences.
The evolving landscape of the electric vehicle market, coupled with shifting consumer preferences and regulatory changes, underscores the need for flexibility and adaptability among industry players. As Tesla navigates these challenges, it will be interesting to see how the company and its suppliers adjust to meet the changing demands of the market.