South Korea’s L&F has slashed the value of its battery material supply deal with Tesla from $2.9 billion to just $7,386, a 99 percent write-down that signals major trouble in the electric vehicle maker’s battery supply chain. The dramatic reduction, announced in late December 2025, has already weighed on Tesla’s share price in regular and premarket trading as investors reassess the company’s ability to secure materials for its 4680 battery cells. The move highlights escalating challenges for Tesla’s ambitious battery program at a time when competition in the global EV market is intensifying.
Deal Background and Original Terms
The supply agreement between South Korea’s L&F and Tesla centered on battery materials that are essential for electric vehicle production, positioning the Korean company as a key node in Tesla’s global sourcing network. According to disclosures cited in the report titled “South Korea’s L&F slashes value of battery material supply deal with Tesla”, the contract originally carried a value of $2.9 billion, underscoring how central L&F was expected to be in supplying advanced cathode materials. For Tesla, that scale of commitment reflected a strategy of locking in long term access to critical inputs as it sought to expand production capacity in North America, Europe, and Asia.
The partnership was closely tied to Tesla’s development of its advanced 4680 battery cells, which the company has promoted as a cornerstone technology for scaling electric vehicle output and reducing per vehicle costs. By aligning with L&F on a multibillion dollar basis, Tesla signaled that it intended to ramp 4680 cell production aggressively, using high nickel chemistries that require stable, high quality material flows. The original terms therefore carried significant implications not only for L&F’s revenue pipeline but also for Tesla’s ability to deliver on promised improvements in range, performance, and manufacturing efficiency for models that depend on 4680 cells, such as newer versions of the Model Y and the Cybertruck.
Announcement of the Value Slash
L&F has now officially stated that the value of its battery material supply deal with Tesla has been cut to $7,386, effectively gutting the financial scope of the agreement. In its latest filing, referenced in the same L&F disclosure on the Tesla contract, the company quantified the reduction as a 99 percent write-down from the original $2.9 billion figure. That level of adjustment is far beyond a routine contract revision and instead signals that the vast majority of the planned material volumes are no longer expected to be delivered under the existing framework.
The change, disclosed in late December 2025, marks a sudden pivot from prior commitments and raises immediate questions about what has changed in Tesla’s demand forecasts or technical roadmap for 4680 cells. While L&F’s filing focuses on the numerical downgrade, the scale of the cut implies a breakdown in the underlying business assumptions that supported the original deal, whether related to Tesla’s internal production ramp, evolving battery chemistries, or broader market conditions. For stakeholders across the EV supply chain, the announcement underscores how quickly large scale battery contracts can be repriced when a leading automaker’s technology plans or sales outlook shift, exposing suppliers to abrupt revenue shocks.
Immediate Impact on Tesla’s Stock
News that the supplier had gutted the $2.9 billion battery deal down to $7,386 quickly filtered into financial markets, where Tesla’s stock slipped as traders digested the implications. Reporting under the headline “Tesla stock slips as supplier guts $2.9 bln battery deal to $7,386” described how investors reacted to the disclosure by marking down Tesla’s valuation, reflecting concern that the company’s battery strategy might be encountering serious obstacles. The share price move signaled that market participants view the L&F contract not as a marginal arrangement but as a bellwether for Tesla’s broader ability to secure and scale next generation cell production.
Pressure on the stock extended into premarket trading, where Tesla shares dropped further as more investors responded to headlines that the battery deal had been slashed from $2.9 billion to $7,386. A separate report, titled “Tesla drops in premarket as supplier slashes battery deal from $2.9 bln to $7,386”, highlighted how the early session decline reflected mounting anxiety over disruptions in Tesla’s core supply dependencies. For portfolio managers and analysts, the episode reinforces the sensitivity of Tesla’s valuation to perceived execution risk in its battery roadmap, since any sustained difficulty in securing materials for 4680 cells could translate into slower vehicle deliveries, higher costs, or both.
Broader Implications for 4680 Battery Supply Chain
The 99 percent write-down has reverberated across Tesla’s 4680 battery supply chain, with one detailed account stating that the company’s 4680 battery supply chain has effectively collapsed as the partner wrote down the deal. In coverage headlined “Tesla’s 4680 battery supply chain collapses as partner writes down deal by 99%”, the reduction of the L&F contract is framed as a near total unwinding of a key pillar in Tesla’s sourcing plan for the new cell format. Because 4680 cells are central to Tesla’s strategy for higher energy density packs and more efficient vehicle architectures, any collapse in the associated material supply chain threatens to ripple through production schedules at factories that were counting on those cells.
This development directly threatens Tesla’s timelines for ramping up 4680 cell production, which had relied on stable material sourcing from partners like L&F to support large scale manufacturing at facilities such as Giga Texas and Giga Berlin. If Tesla must now seek alternative suppliers or renegotiate terms with existing partners, the process could introduce delays in vehicle launches that depend on 4680 packs, as well as potential cost increases if replacement materials come at a premium. For the broader battery sector, the episode illustrates how ongoing shifts in technology preferences, demand patterns, and competitive pressures can rapidly reshape supply relationships, forcing both automakers and material producers to reassess long term commitments and exposing the fragility of even multibillion dollar deals.
Shifting Market Dynamics and Strategic Choices Ahead
The collapse in value of the L&F agreement comes against a backdrop of shifting market dynamics in electric vehicles, where growth rates, pricing power, and technology bets are all under scrutiny. As Tesla navigates a more crowded field of EV competitors and fluctuating demand in key markets, the company’s willingness or ability to honor earlier volume assumptions for 4680 materials appears to have changed, at least as reflected in the revised contract value. For L&F, the write-down underscores the risk of concentrating heavily on a single high profile customer, since a strategic pivot by that customer can rapidly erase expected revenue and complicate investment plans in new production capacity.
Looking ahead, I see the L&F decision as a forcing event that will push Tesla to clarify its battery strategy, whether by doubling down on in house 4680 production, diversifying chemistries, or leaning more heavily on established suppliers for conventional cell formats. The episode also sends a signal to other material providers that even marquee contracts with leading EV makers may not be immune to drastic revisions when technology roadmaps evolve or financial pressures mount. For policymakers and industry planners who have treated large battery deals as anchors for industrial policy and regional investment, the $2.9 billion to $7,386 swing is a reminder that the fast moving nature of the EV transition can upend expectations almost overnight, with significant consequences for jobs, capital allocation, and the pace of decarbonization.
