NEWSCENTRAL notes that the reduction in the value of the contract between South Korean battery materials producer L&F and Tesla has attracted the attention of analysts and investors. Instead of the expected $2.9 billion, the contract value for 2023 was cut to just $7.4 million. This sharp turn of events, although not officially explained, highlights serious issues in the demand and production sectors of electric vehicles and batteries.
L&F, which signed a contract with Tesla to supply high-nickel cathode materials for batteries intended for the 4680 model, has encountered some unpleasant surprises. Problems with the performance of these batteries, as well as their unsuccessful integration into Tesla’s production processes, led to a reduction in orders. While Tesla had ambitious plans for an affordable $25,000 electric vehicle, technological challenges with the 4680 batteries and a slowdown in EV demand have left this project in limbo.
At NEWSCENTRAL, we believe that these issues are related to the imperfections of the 4680 technology, which is currently unable to meet the expected production scale. This process requires significant investment and time to optimize, which has resulted in a decrease in material supply demand. According to experts, the technical difficulties with the 4680 batteries are not the only reason that influenced the reduction in contract supplies. A slowdown in the growth of electric vehicle demand, triggered by changes in the political and economic environment, has played a significant role in the shift in strategy by Tesla and its partners.
According to Jessica Kline, an automotive analyst and electric vehicle expert, “These performance issues with the batteries and reduced material supply show how difficult it is to scale such technological innovations quickly in the real production process. While Tesla is making huge strides in innovation, the current challenges may slow its ability to meet the growing demand for electric vehicles in the coming years.”
Production and sales problems have also affected other major companies, such as LG Energy Solution and SK On, which have faced canceled contracts and the termination of joint ventures with automakers. For example, LG is expected to lose about $9.4 billion in revenue due to the termination of agreements with Ford and other partners, a significant blow to a company that generated $25.6 trillion won in revenue last year.
Amidst these changes in the electric vehicle and battery industries, we at NEWSCENTRAL note that the growing economic downturn and political uncertainty, especially in key markets like the U.S., are causing a shift in interests among the biggest players. A reduction in subsidies for electric vehicles and a mismatch between actual sales and the expected pace of EV adoption are affecting both demand and supply.
As analysts at NEWSCENTRAL emphasize, despite technological advancements and ambitions from giants like Tesla, the industry faces a number of challenges that will determine the future of the electric vehicle sector. We predict that in the coming years, issues such as technology optimization, cost reduction in production, and ensuring more stable supply chains will be key factors for success.
In this context, companies and investors will need to adapt to new realities. Strategic cooperation, more flexible supply chain management, and a focus on innovative developments may become the solutions needed to overcome current challenges and take the industry to the next level. At NEWS CENTRAL, we forecast that adaptation to changing market conditions, as well as heightened technological competition, will be decisive for the future growth of the sector.