Tesla Faces Challenges in 4680 Dry Electrode Development
L&F Continues Supplying Cathode Materials for LG Energy Solution's 4680 Batteries
With Tesla revising its in-house battery production strategy, the large-scale cathode material supply contract previously signed with L&F has effectively ended, raising the possibility that the associated supply volume may be transferred to LG Energy Solution, Tesla's key battery partner.
According to the battery industry on December 31, L&F announced on December 29 that the scale of its cathode material supply contract with Tesla had been drastically reduced from the original 3.8347 trillion won to just 9.73 million won. This change is due to Tesla's structural adjustment of its plans to produce next-generation cylindrical batteries, known as the "4680," in-house.
Initially, the contract was structured so that L&F would supply high-nickel cathode materials to Tesla for use in the direct production of its next-generation 4680 (46mm diameter, 80mm height) cylindrical batteries. However, the industry believes that Tesla has effectively retreated from its strategy of producing battery cells directly, as it encountered technical challenges and cost burdens during the development and mass production of the 4680 battery using a dry electrode process.
Anna Lee, a researcher at Yuanta Securities, said, "As Tesla adjusted the structure and timeline of the previously planned 4680 battery project, it chose to terminate the existing contract rather than maintain it, and is now moving to discuss new projects that reflect the changed environment." L&F stated, "There is no change in the shipment and customer supply of our main product, the NCMA95 high-nickel product," and added, "Supply to major domestic battery cell manufacturers is also proceeding smoothly."
Within the battery industry, there is growing expectation that the 4680 battery volume, which Tesla will no longer produce in-house, will be transferred to LG Energy Solution. Currently, L&F is the exclusive supplier of cathode materials for LG Energy Solution's 4680 batteries.
The 4680 battery, first unveiled by Tesla in 2020, is a next-generation cylindrical cell that features significantly improved energy capacity and output compared to the existing 2170 (21mm diameter, 70mm height) battery. LG Energy Solution is currently conducting pilot production of the 4680 battery at its Ochang plant in North Chungcheong Province.
However, amid continued sluggish demand for electric vehicles, some observers believe that it will not be easy for L&F and LG Energy Solution to sign a new supply contract worth trillions of won in the short term. Recently, LG Energy Solution has experienced volatility in its business environment, as large-scale contracts under discussion with Ford and FBPS have fallen through.
An L&F representative stated, "There is no confirmed supply contract yet for the volume following the reduced contract."
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