Tesla's Cathode Order Fizzles: Instead of 2.9 Billion Only 7,000 Dollars

Author: Daniel AJ Sokolov
Source: Heise News

Summary

Tesla ordered cathodes for new 4680 battery cells from Korean company L&F reportedly worth 2.9 billion US dollars, but actually only took delivery of cathodes worth 7,386 dollars. The massive order loss affects not just Tesla and L&F – other manufacturers like Ford and suppliers like LG Energy Solutions are experiencing similar setbacks in the electric vehicle market.

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Detailed Summary

Tesla and L&F: Expectations vs. Reality

Elon Musk announced at Tesla's "Battery Day" in 2020 that new battery cells would revolutionize the electric car market starting in 2023. The highly efficient 4680 cylindrical cells were supposed to deliver more power at lower costs. In 2023, Tesla subsequently signed a supply contract with Korean company L&F for cathodes worth a total of 2.9 billion US dollars, which were to be delivered by the end of 2025.

However, reality turned out to be catastrophic: Tesla only took delivery of cathodes worth 7,386 dollars – less than one thousandth of the planned volume. L&F announced this news between the years. For the South Korean company, this order loss is devastating, as the contract would have meant a five-fold increase in annual revenue. L&F does not expect any further revenue from this contract.

Problems with Cybertruck Strategy

The reason for the massive order decline lies in the poor performance of the Cybertruck. Tesla currently only installs 4680 cells in this vehicle. The Gigafactory in Texas could produce 250,000 units per year, but actual sales are significantly less than one tenth of this capacity. Even additional purchases by other Musk-managed companies (SpaceX and xAI with over 1,000 Cybertrucks total) could not solve the problem.

Possible Technological Obstacles

Tesla may have found cheaper or better suppliers for high-nickel cathodes. However, the battery cells are not installed in any other vehicle model, and the announced sales to third parties have not taken place so far. Experts suspect that the energy-saving and cost-effective dry coating of the foils proved more difficult in mass production than Elon Musk assumed in 2020.

Technically, there are differences between Tesla's 4680 cylinders and the flatter cells from BYD: While Tesla's cells have higher energy density, they produce significantly more waste heat and have larger internal resistances.

Broader Market Problems

The problems extend far beyond Tesla and L&F. The North American electric vehicle market is experiencing a phase of stagnation due to political and economic reasons. Tesla also found itself on the defensive due to intensified competition, particularly from China. Additionally, Elon Musk's political activities have significantly damaged the brand's image.

Comparable Cases at Ford and LG Energy Solutions

Larger automakers are also affected: After General Motors, Ford has also significantly scaled back its electric vehicle plans and written off billions of dollars. This particularly impacts South Korean supplier LG Energy Solutions (LGES). LGES was supposed to supply batteries totaling 75 gigawatts (approximately 7.1 billion dollars) from early 2027 to end of 2032 – but Ford will not build the planned vehicles.

A joint venture between LGES and Honda for joint battery production in North America is also on the brink. Honda is buying out the joint venture's factory in Ohio (book value: 2.9 billion dollars) and will lease it back.

Freudenberg Closes Battery Production

German Freudenberg Group is shutting down its lithium battery production in Michigan. Subsidiary Xalt, which has been assembling cells supplied by LGES since March 2024 into batteries for the e-commercial vehicle market, must cease operations. The hoped-for growth prospects for this market are not materializing. LG Energy Solutions was supposed to supply modules for 19 gigawatts (2.8 billion dollars) through the end of 2031 – but actually only 110 million dollars were delivered.

Key Takeaways

• The alleged 2.9 billion dollar order from Tesla to L&F was canceled by over 99.9% – an unprecedented contract disaster
• The Cybertruck, intended as the flagship product for 4680 cells, has become an economic failure
• Technical challenges in dry coating were apparently underestimated
• The slowdown in the electric vehicle market affects all major manufacturers and suppliers
• South Korean battery manufacturers bear the main economic burden of this market development
• Billion-dollar losses for Ford, General Motors, LGES, and Freudenberg

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