Tesla 4680 Battery Project Returns to the Spotlight
The Tesla 4680 battery program has once again become a major talking point in the industry, following a significant contract reassessment by the South Korean high-nickel cathode supplier, L&F. What was once seen as a landmark agreement—a symbol of Tesla’s next-generation battery breakthrough—has now been valued at a fraction of its original worth, sending ripples through the battery supply chain and financial markets.
In February 2023, L&F signed a multi-year high-nickel cathode material supply agreement with Tesla and its affiliates. Based on raw material prices at the time, the contract was initially estimated to be worth approximately KRW 3.83 trillion, with deliveries scheduled from 2024 to 2025. However, on December 29, 2025, L&F disclosed to the Korea Exchange that the estimated contract value had been revised down to less than KRW 10 million—a reduction of nearly 99%. The only explanation provided for the drastic change was a “reduction in supply volume.”
For nearly two years, this contract was widely viewed as L&F’s golden opportunity to ride the wave of Tesla’s 4680 battery rollout. Its near-total disappearance has not only disrupted L&F’s revenue forecasts but has also emerged as one of the most concrete financial signals indicating that Tesla’s 4680 production is facing significant headwinds.
From Trillions to Millions: The Disappearance of a High-Nickel Battery Contract
L&F offered minimal detail in its announcement, stating only that supply volumes had changed. However, reports from global media outlets and industry analysts have helped paint a clearer picture of the situation.
According to sources cited by Reuters, the contract covered high-nickel cathode materials specifically intended for Tesla’s 4680 cylindrical cells. The supply period was set to run from January 2024 through December 2025, with deliveries primarily tied to Tesla’s Gigafactory in Texas. These batteries were expected to support key platforms, including the Cybertruck and Tesla’s planned low-cost electric vehicle.
South Korean media further reported that, after the revision, the remaining contract value essentially covers only early-stage sample shipments. L&F stressed that the adjustment was a mutual decision, resulting from shifts in the global electric vehicle market and changes in battery supply dynamics, rather than a one-sided cancellation.
The market’s reaction was swift and harsh. On the first trading day after the announcement, L&F’s share price fell by more than 7% intraday. The same contract that had once boosted valuations and fueled hopes for aggressive high-nickel expansion had now effectively been written down to near zero, amid cooling EV demand and repeated delays in 4680 mass production.
Is the Tesla 4680 Battery a Failure? Distinguishing Headlines from Reality
In financial markets and across online discussions, the sharp contract reduction was quickly framed as proof that “Tesla’s 4680 battery has failed.” While the headline is dramatic, the reality is more nuanced.
Reuters linked the contract revision to two main factors. First, Tesla’s in-house production of 4680 cells has ramped up more slowly than anticipated, with key manufacturing processes—such as dry electrode technology—proving difficult to stabilize at commercial scale. Second, overall growth in U.S. EV demand has slowed, reducing incremental demand for high-nickel battery cells.
Bloomberg, in a report titled “The Cost of Cybertruck’s Failure for Korean Suppliers,” took a model-focused angle. It highlighted that the Cybertruck—currently the only mass-produced vehicle using 4680 cells at scale—has underperformed initial sales expectations. As a result, upstream demand for high-nickel materials has been much weaker than forecast, directly contributing to the collapse of L&F’s contract.
Publicly available information aligns with these assessments. When Tesla unveiled the 4680 cell at its 2020 Battery Day, the company promised significant cost reductions within roughly three years by combining larger cylindrical cells with dry electrode manufacturing. These savings were meant to enable a mass-market electric vehicle priced around USD 25,000.
By the end of 2025, however, 4680 cells are used in only a limited number of models, primarily the Cybertruck. Early Model Y variants equipped with 4680 batteries have reportedly been discontinued, while the planned affordable EV has been revised or delayed multiple times.
Technically, Tesla continues to produce and deploy 4680 batteries. Teardown analyses indicate that the cells do deliver higher energy density through a high-nickel cathode system and advanced manufacturing processes. However, production yields and cost reductions have fallen short of initial targets. Elon Musk has acknowledged during earnings calls that scaling dry electrode production remains a “major challenge” and that the ramp-up pace is slower than originally envisioned.
Overall, the near-cancellation of the L&F contract does not indicate a fundamental failure of 4680 battery technology. Instead, it signals that the high-nickel roadmap for the 4680—once expected to simultaneously power the Cybertruck and a low-cost EV—has been forced to slow or partially retreat in the face of manufacturing complexities and softer-than-expected market demand.
High-Nickel Batteries Step Back: From Mass Adoption to Premium Applications
The market shift behind L&F’s contract revision is also evident in Tesla’s evolving battery chemistry strategy.
On one hand, high-nickel batteries remain essential for premium vehicles and long-range variants. In the U.S. and Europe, certain Model 3 and Model Y versions, along with performance models, continue to rely on high-nickel NCA and NCM chemistries supplied by partners like Panasonic and LG Energy Solution. Demand in this segment has not fundamentally reversed.
On the other hand, lithium iron phosphate (LFP) batteries—and other cost-optimized chemistries—are rapidly capturing the high-volume segment. In China and several export markets, Tesla’s standard-range models now overwhelmingly use LFP prismatic cells. In its energy storage systems, Tesla has also clearly shifted toward LFP, collaborating with partners like LG Energy Solution to localize LFP production in the United States.
This strategic rebalancing reflects broader macroeconomic conditions in the U.S. EV market. With interest rates remaining elevated and policy support uncertain, consumers have become more price-sensitive toward higher-priced electric vehicles. Across the industry, automakers have responded by reducing or delaying pure EV investments.
LG Energy Solution recently disclosed the cancellation or termination of contracts with Ford and Freudenberg, affecting orders worth more than KRW 13 trillion. These decisions were similarly attributed to adjustments in North American EV programs and policy uncertainty.
In this environment, high-nickel batteries are transitioning from a widely touted “next-generation mainstream solution” to a more selective role, focused on premium segments where performance and extended range are key selling points.
For Tesla, this shift means tapping the brakes on high-nickel 4680 capacity expansion at its Texas Gigafactory, while accelerating global investment in more cost-effective LFP batteries and energy storage products.
Nickel Supply Reality Check: From Optimism to Resource Discipline
The cooling of high-nickel expectations is also affecting the upstream nickel supply sector.
On December 26, Shengton Mining announced the termination of its planned 40,000-ton-per-year high-grade nickel matte project in Indonesia’s Weda Bay Industrial Park. The project, launched in 2021 with an estimated investment of approximately USD 245 million, was intended to supply battery precursor materials but never reached commercial production. The company has now dissolved the joint venture established for the project.
During the peak of high-nickel optimism and Indonesia’s rapid nickel capacity expansion, many projects were launched at a rapid pace. As nickel prices softened and margins tightened across parts of the value chain, uncompleted or underperforming projects have become the first casualties.
At the same time, Indonesia has signaled a move toward tighter supply control. The government plans to reduce nickel ore production quotas in 2026 from roughly 379 million tons to around 250 million tons—a cut of nearly one-third—to stabilize prices and ease oversupply pressure. Following the announcement, nickel futures on both the Shanghai and London exchanges rebounded sharply.
Analysts view this move as a strategic shift by resource-rich countries, away from volume-driven expansion and toward a focus on price stabilization and profit redistribution.
Taken together, the near-erasure of L&F’s contract, the cancellation of nickel projects, and Indonesia’s proposed production cuts represent a synchronized adjustment across the battery ecosystem. They reflect a broader truth: the era of unconditional expansion driven by high-nickel battery expectations is giving way to a phase of selective contraction, recalibration, and a more disciplined approach to pricing and investment.
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