Tesla's battery cathode order: $7,000 instead of $2.9 billion

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New battery cells that deliver more power at lower costs should revolutionize the electric car market starting in 2023. Tesla CEO Elon Musk announced this in 2020 at "Tesla Battery Day" at "Tesla Battery Day". While there was no mass-market car in 2023, there was at least an order for the necessary cathodes for new 4680-format battery cells. The Korean company L&F was supposed to supply cathodes worth $2.9 billion by the end of 2025. In reality, Tesla only accepted cathodes worth $7,386.

L&F announced this between the years. The canceled contract is painful for the Koreans, as it would have meant a fivefold increase in annual revenue. L&F does not expect further revenue from the contract.

So far, Tesla has exclusively used the cylindrical cell in its Cybertruck. This vehicle has proven to be a flop. Tesla's Gigafactory in Texas could build 250,000 units per year, but natural sales are currently likely less than a tenth of that. According to Electrek According to Electrek, other companies managed by Elon Musk, SpaceX and xAI, have recently purchased more than 1,000 Cybertrucks; that's not enough to make a significant difference.

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It is possible that Tesla has found other, cheaper or better suppliers for the high-nickel cathodes and is therefore not buying from L&F. However, Tesla is not using these affordable battery cells in any other vehicle type, and sales to third parties have so far been limited to an announcement. It is likely that the energy-saving and thus cheaper dry coating of the foils has proven more difficult in mass production than Musk assumed in 2020.

By the way: Those interested in the differences between Tesla's cylindrical 4680 cells and the flat cells used by competitor BYD can delve into a comparison. While Tesla's cells are ahead in terms of energy density, they produce significantly more waste heat that needs to be reliably cooled. This indicates higher internal resistances.

Not Just Tesla and L&F

Partly for political reasons, there is a slump in the North American electric vehicle market. Tesla has also been put on the defensive in other parts of the world. On the one hand, competition, especially from China, has caught up; on the other hand, Musk's political activities have caused Tesla's brand image to plummet. The Cybertruck has fallen particularly far behind Musk's promises.

The general slump is also affecting other manufacturers. After General Motors, Ford has also scaled back its electric vehicle plans and is writing off billions. This also affects a South Korean supplier: LG Energy Solutions (LGES). This company was supposed to supply batteries for a total of 75 gigawatt-hours or around $7.1 billion (exchange rate at contract signing in October 2024) from early 2027 to the end of 2032. However, Ford will not build the vehicles for which these batteries would have been needed. For LGES, it was all for nothing.

A joint venture between LGES and Honda for the joint production of batteries for the North American electric car market is also in limbo. For the purpose of "improving operational efficiency," the Japanese are buying the joint company's factory in Ohio. The joint venture will lease back the building, which has a book value of $2.9 billion.

Freudenberg Battery Power Systems Closes

The German Freudenberg Group, in turn, is ceasing its production of lithium batteries in Michigan. There, the Freudenberg subsidiary Xalt has been using cells supplied by LGES since March 2024 for batteries for the e-commercial vehicle market. However, the growth fantasies for this market are unlikely to be fulfilled for the time being, which is why Xalt has to close down.

LG Energy Solutions was supposed to deliver modules for a total of 19 gigawatt-hours or $2.8 billion to Freudenberg by the end of 2031. Only $110 million was delivered, and the Koreans are losing the rest.

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