The Tesla 4680 Battery Slowdown: Analyzing the 99% L&F Supply Contract Collapse

The Tesla 4680 Battery Slowdown: Analyzing the 99% L&F Supply Contract Collapse

What happens when a nearly $3 billion supply deal evaporates overnight? For the Western observer tracking the bruising battle in the global EV market, the latest development from South Korea’s battery supply chain offers a stark warning: Tesla 4680 battery supply ambitions are facing significant headwinds. South Korean battery material maker L&F recently announced that its 2023 supply agreement with Tesla, initially valued at a staggering $2.9 billion, has been slashed to a mere $7,386. This near-total cancellation, citing only a ‘change in supply quantity,’ signals a major reassessment of Tesla’s most advanced battery program.

For American and European investors and industry watchers, this isn’t just a Korean supplier’s problem. It’s a critical data point on the viability of Elon Musk’s long-touted, next-generation cell technology, the 4680 battery.

The Implosion of a $2.9 Billion Deal

The contract, signed in early 2023, stipulated the delivery of high-nickel cathode materials from L&F between January 2024 and December 2025. These specific materials were earmarked for Tesla’s proprietary 4680 cylindrical cells, which were meant to be the key to unlocking lower costs and greater range, enabling Musk’s vision of a mass-market, affordable EV.

• Original Scope: High-nickel cathode materials for the 4680 cell production ramp.
• Revised Value: Reduced from ~$2.9 billion down to just $7,386 (a 99% drop).
• Timeline Impact: The contract spanned from January 2024 through the end of 2025.

While L&F maintained that shipments to its other major Korean cell manufacturing clients were proceeding normally, the writing was clearly on the wall for the Tesla allocation.

Why the Massive Cut? Two Converging Crises

While L&F cited only a quantitative change, industry analysts quickly connected the dots, pointing to twin failures plaguing the 4680 roadmap:

1. The Cybertruck Bottleneck

Currently, the 4680 cells are almost exclusively used in the Cybertruck, a vehicle that has significantly underperformed expectations.

• Musk once projected annual sales in the hundreds of thousands, but 2025 saw sales plummeting by 38% year-over-year in the first nine months.
• The low sales volume means Tesla simply does not need the massive influx of cathode materials it had planned for.

2. Manufacturing Headaches

The dry electrode process central to the 4680 cell’s cost-saving potential has proven to be a major scaling hurdle. Samsung Securities analyst Cho Hyun-ryul suggested that production yield issues with the 4680 batteries, combined with overall weak EV demand, are the primary culprits for the order reduction. If Tesla cannot scale the cell economically, the material demand vanishes.

The Wider Ripples: Anxiety in the K-Battery Sector

This order collapse is not an isolated incident; it’s symptomatic of broader pressure on the South Korean battery ecosystem amid slowing Western EV adoption and policy shifts.

For Western OEMs and investors, this highlights supply chain fragility when relying on single, ambitious technology bets:

• Other major Korean suppliers have faced similar setbacks: LG Energy Solution reportedly lost potential revenue from canceled deals with Ford Motor, while SK On dissolved its battery factory joint venture with Ford.
• This industry-wide contraction is forcing Korean firms to aggressively pivot their focus from EV batteries toward the rapidly growing Energy Storage System (ESS) market to offset losses.

See our analysis on the broader impact of EV market cooling on global cell production.

Expert Takeaway for the West

This story is a classic case of execution risk outpacing technological promise. Tesla’s 4680 cell was supposed to be the technology moat to cement its dominance; instead, its slow ramp and limited deployment—confined almost entirely to a niche, low-volume truck—have created a gaping hole in its supply chain strategy. Western automakers, watching this unfold, must be cautious about betting too heavily on unproven, proprietary battery architectures. Stability in established chemistries, like the 2170 or LFP cells currently used in Tesla’s volume models, remains the near-term reality.