Why The Tesla Cybertruck Brought on A $2 Billion Hit To This South Korean Firm

• A Tesla provider has written down almost 99% of its provide contract.
• The contractor was initially meant to produce elements for Tesla’s 4680 battery.
• It now involves an in depth with simply $6,800 in income—means lower than the $2.9 billion projected in 2023.

Tesla anticipated the Cybertruck to promote like gangbusters. Issues did not work out precisely as deliberate, and, very similar to CEO Elon Musk warned that the EV might “flop” (however at the very least he likes it). And, on the finish of the day, the one actual financial danger was to Tesla, proper?

Effectively, not precisely. What many individuals overlook about is that Tesla could have vertically built-in a variety of its product improvement, however even essentially the most lean producers nonetheless want upstream suppliers. One South Korean provider is now feeling the warmth after its contract with Tesla was slashed by almost 99%.

Photograph by: Tesla

Battery materials provider L&F Co. is the most recent casualty of the Cybertruck’s short-lived fiasco. In accordance with a report from BloombergL&F revealed this week {that a} huge provide contract—initially valued at $2.9 billion when it was awarded 9 months earlier than the primary Cybertruck was delivered—has been slashed by almost 99%. The contract, which formally concludes on Dec. 31, ends with a symbolic $6,800 in income (at in the present day’s conversion charges) for L&F.

The fabric that L&F provided to Tesla was a high-nickel cathode, reportedly supposed for the holy grail 4680 cell that Tesla developed to be used with new merchandise just like the Cybertruck.

Sadly, the 4680 program hasn’t precisely gone easily. What was purported to be each an engineering and manufacturing leap for Tesla sparked competitors from different world battery suppliers. In the meantime, Tesla’s inside battery program struggled to achieve traction—very similar to Cybertruck gross sales—and geopolitical tariff turmoil turned automotive suppliers the other way up.

Now, it is necessary to level out that whereas Cybertruck demand could have contributed to L&F’s contract write-down, it is probably not the one issue. Bloomberg studies that L&F acknowledged that world EV provide commerce adjustments in an announcement:

The provision contract was additionally affected by broader coverage and financial points, together with the elimination of Inflation Discount Act subsidies, the individual added. Tesla representatives didn’t instantly reply to an emailed request for remark.

L&F mentioned in an announcement that the revision was inevitable as schedules have been adjusted consistent with adjustments within the world electrical car market and battery provide situations.

“There have been no adjustments to shipments or buyer provide of the corporate’s flagship high-nickel product,” L&F mentioned, including that shipments to main Korean cell producers are continuing easily.

The unlucky losers on this state of affairs are L&F’s traders, who have been banking on the provider contract being an enormous win for the corporate. As a substitute of report returns, the corporate’s inventory is now buying and selling down greater than 11% this week and 64% down because the Tesla contract was introduced in early 2023.

For Tesla, that is barely a footnote. The Cybertruck nonetheless exists, nonetheless sells and nonetheless prints headlines. However suppliers ought to take their very own cautionary notes, although: constructing a enterprise round Tesla’s imaginative and prescient could also be daring, but it surely’s additionally ruthlessly conditional. If something will get in the best way, together with tariffs, the long run might change at a second’s discover.