Latest / Elon Musk Podcast / Tesla's $2.9 Billion Battery Deal Just Collapsed to $7,386

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Tesla's $2.9 Billion Battery Deal Just Collapsed to $7,386 · Elon Musk Podcast

• 0:02
  South Korean battery material supplier LNF Code just announced
• 0:06
  that it's $2.9 billion supply deal with Tesla has been written
• 0:10
  down to just $7386. A deal worth $2.9 billion is now
• 0:19
  worth less than $8000 now. The company cited a change in
• 0:23
  supply quantity as the reason for the adjustment.
• 0:27
  Did not elaborate. We tried to call them, try to
• 0:29
  ask them, they didn't respond. It didn't need to do that.
• 0:34
  The materials LNF was supposed to supply were high nickel
• 0:37
  cathode components designated for Tesla's in house 4680
• 0:43
  battery cells. The primary consumer of those
• 0:45
  cells is the cyber truck, and a cyber truck is not selling.
• 0:49
  This is arguably the strongest evidence, yet the Tesla's 4680
• 0:53
  program, the battery tech Elon Musk once called the key to
• 0:57
  having cost and enabling a $25,000 electric car, is in
• 1:01
  serious trouble. How did a $2.9 billion contract
• 1:05
  collapse to essentially nothing? And the answer goes back to
• 1:09
  Battery Day 2020, when Elon Musk promised the 4680 would change
• 1:14
  everything. Five years later, the only
• 1:16
  vehicle using the cell starts at $77,990.00 and cannot find
• 1:22
  enough buyers. Now we're going to walk through
• 1:25
  the original promise, the production failures, the cyber
• 1:27
  trucks demand crisis, and what this means for Tesla's battery
• 1:31
  strategy. And we'll get right into that
• 1:33
  after this very short break. Now, Tesla unveiled the 4680
• 1:38
  battery cell. It has battery day event in
• 1:41
  September of 2020. Now, the name comes from the
• 1:44
  dimensions 46mm in diameter, 80 millimeters in height.
• 1:48
  And Musk described it as a breakthrough.
• 1:51
  The new cell would deliver five times the energy, six times the
• 1:54
  power, and 16% more range than Tesla's existing cells.
• 1:59
  The design would enable a 14% cost reduction per kWh from the
• 2:04
  form factor alone. Combined with other
• 2:07
  manufacturing innovations, Tesla claimed it could cut battery
• 2:10
  costs in half, and that cost reduction was supposed to unlock
• 2:14
  a $25,000 fully autonomous electric car within three years.
• 2:21
  It would also enable the Model S Plaid Plus with over 520 miles
• 2:26
  of range, and Tesla plan to produce 200 GW hours of 4680
• 2:30
  cells annually and potentially supply other automakers.
• 2:36
  None of those things happened. The Model S Plaid Plus was
• 2:39
  cancelled before it even shipped.
• 2:40
  The $25,000 car was completely scrapped, with Tesla pivoting
• 2:46
  instead to strip down versions of existing models.
• 2:49
  Tesla never achieved the cost reductions it promised.
• 2:52
  The dry electrode manufacturing process, which was supposed to
• 2:56
  be the key to cheap production, proved far more difficult to
• 3:00
  scale than Musk had anticipated. The process involves coating
• 3:03
  electrodes with a dry powder rather than a wet slurry, which
• 3:07
  would eliminate the need for expensive drying ovens and
• 3:10
  reduce manufacturing footprint by 90%.
• 3:13
  Tesla acquired the technology when it purchased Maxwell
• 3:15
  Technologies in 2019, and 60 years later, the company still
• 3:20
  has not mastered it for mass production.
• 3:23
  In June of 2024, Musk admitted on an earnings call that Tesla's
• 3:27
  4680 cells cost more to produce than cells purchased from
• 3:31
  suppliers. So the company saw a path that
• 3:33
  cost parity by the end of the year, describing it as a very
• 3:36
  difficult path. Those four years after Battery
• 3:39
  Day, the promise of cells and half the cost had become a
• 3:42
  struggle just to match what competitors could buy off the
• 3:45
  shelf. A patent filed in November 2025
• 3:48
  suggests the company may have finally solved some of the dry
• 3:51
  Electro challenges, but that is five years after the original
• 3:55
  announcement, and the 4680 has been perpetually almost ready.
• 3:59
  CATL founder Robin Zhang reportedly told Musk directly
• 4:04
  during a meeting in China that the 4680 program would fail, and
• 4:08
  according to Reuters, Zhang debated battery technology with
• 4:11
  Musk and later said publicly the Musk was silent afterward
• 4:14
  because he does not know how to make a battery now.
• 4:17
  The L&F deal was signed in early 2023.
• 4:20
  The contract was supposed to run through from 2024 through
• 4:24
  December 2025. L&F would supply high nickel
• 4:27
  cathode materials directly to Tesla for the 4680 cells.
• 4:32
  Now. At the time, the industry saw
• 4:33
  this as a major move by Tesla to secure supply from massive
• 4:37
  production ramp. The total value is projected at
• 4:40
  2.9 billion or 3.83 trillion. Korean won.
• 4:45
  Now that number is 9.73 million. One that is 6700 to $7400
• 4:52
  depending on the exchange rate in the reduction is 99.9997%.
• 4:59
  That is functionally A cancellation.
• 5:02
  Tesla did not need the materials because it is not building 4680
• 5:06
  cells at scale. I've been digging through the
• 5:10
  analytics of the show and notice that 37% of you following the
• 5:13
  channel. For you, I am forever grateful.
• 5:16
  Now, the other 63% of you haven't hit the follower
• 5:19
  subscribe button. I've been an independent
• 5:21
  journalist covering Elon Musk, Space Flight, SpaceX, and tech
• 5:24
  for the last six years, and I will continue for the next 10
• 5:27
  with your help. And all I ask from you is one
• 5:30
  second of your time to hit the follower subscribe button on the
• 5:33
  platform you're watching or listening on right now.
• 5:35
  I'm extremely grateful and blessed to have you in this
• 5:37
  community, so thank you. Now the Cyber Truck is the only
• 5:42
  Tesla vehicle using the company's own 4680 cells.
• 5:46
  Tesla also sold a Model Y variant with 4680 cells, but
• 5:49
  that variant was discontinued after buyers reported poor range
• 5:53
  and charging performance compared to the version using
• 5:56
  supplier cells. That left the Cyber Truck as the
• 5:59
  sole application for Tesla's in house battery tech.
• 6:02
  And a Cyber truck has been a commercial disappointment.
• 6:05
  Musk once predicted the truck would sell hundreds of thousands
• 6:08
  of units annually. Tesla has production capacity
• 6:12
  for 250,000 units per year at Giga Texas, and the truck is
• 6:16
  currently selling at a run rate of roughly 20 to 25,000 units
• 6:23
  per year. Now that is less than 10% of
• 6:27
  capacity. The factory floor, designed for
• 6:30
  high volume production, is sitting mostly idle now.
• 6:34
  In March, Tesla began offering discounted financing to move
• 6:37
  inventory. By June, the company launched 0%
• 6:40
  APR incentives as trucks piled up on lots across the country.
• 6:44
  And in September, Tesla discontinued the cheapest cyber
• 6:48
  truck variant because demand was too weak to justify it.
• 6:51
  The stainless steel pickup that was supposed to showcase Tesla's
• 6:54
  manufacturing innovation has become a symbol of overreach,
• 6:58
  and the angular design polarizes buyers.
• 7:00
  The price, $77,990.00, puts it out of reach for most truck
• 7:06
  customers, and a cyber truck has been recalled 8 times since
• 7:09
  deliveries began in November 2023 for a variety of hardware
• 7:14
  and software issues. None of this is what Tesla plan
• 7:17
  when it committed billions of dollars to 4680 production.
• 7:21
  Now, if Tesla's not building cyber trucks, it doesn't need
• 7:24
  4680 cells. If it does not need 4680 cells,
• 7:27
  suppliers like LNF have no one to sell their materials to.
• 7:31
  It's brutal. And 99% reduction in a supply
• 7:34
  contract means the contract was basically cancelled.
• 7:37
  It means Tesla is not ramping 4680 production.
• 7:40
  If anything, they might be winding it down, cutting it all
• 7:43
  the way off. And the implications extend
• 7:46
  beyond one supplier, the LNF collapse as part of a broader
• 7:49
  retreat across South Korea's battery sector.
• 7:52
  Samsung Securities analyst Ho or Cho Hyun Royale told Reuters
• 7:58
  there is anxiety about the battery sector.
• 7:59
  Overall, LG Energy Solution is expected to lose approximately
• 8:03
  13.5 trillion won about $9.4 billion US in revenue after Ford
• 8:11
  terminated supply contracts. SK On has ended its battery
• 8:17
  joint venture with Ford in the United States.
• 8:19
  Ford itself announced a $19.5 billion write down in plans to
• 8:24
  scrap multiple electric vehicle models.
• 8:28
  Now. The trigger for much of this was
• 8:29
  the end of the $7500 federal EV tax credit in September 2025 by
• 8:34
  Donald Trump, the expiration of the Inflation Reduction Act
• 8:40
  Subsidies change the economics of EV production and cause
• 8:43
  automakers to reduce or cancel battery orders.
• 8:47
  LNF acknowledged in a statement that the supply contract was
• 8:50
  affected by broader policy and economic issues, including the
• 8:54
  elimination of IRA subsidies. The Cybertruck's weak demand is
• 8:58
  part of the story, but is not the only factor.
• 9:01
  The entire EV supply chain is contracting as American policy
• 9:06
  shifts away from electrification subsidies.
• 9:09
  Competitors are now beating Tesla too.
• 9:11
  BMW and Rivian are using 46mm diameter cells from Samsung, LG
• 9:17
  and CATL with structural battery pack designs.
• 9:20
  Those are the features Tesla promised would be exclusive
• 9:23
  advantages. Now BMW has committed to the
• 9:25
  4695 format, which is the same 46mm diameter with a taller 95mm
• 9:31
  height. Now Tesla is no longer leading
• 9:34
  in the battery format it invented.
• 9:36
  The $25,000 Tesla that was supposed to be enabled by 4680
• 9:41
  cost reduction has been replaced by stripped down versions of
• 9:44
  existing models. Standard Range Model 3 and Model
• 9:47
  Y, launched in October 2025, are priced about $5000 below the
• 9:51
  other models. They are stopgap measures, not
• 9:55
  the revolutionary low cost EV that Musk promised on Battery
• 9:58
  day. And the cybercrab Cybercrab Robo
• 10:02
  taxi is also supposed to use 4680 cells.
• 10:06
  Musk insists it will launch in early 2026 without a steering
• 10:10
  wheel. Tesla has not solved Level 4
• 10:13
  autonomous driving yet. And if the Cybercam launches at
• 10:15
  all, it will likely be an even more limited program than a
• 10:19
  cyber truck. That would not generate the
• 10:21
  volume needed to justify large scale 4680 production.
• 10:25
  And for current cyber truck owners, the battery supply
• 10:28
  appears secure for now. Tesla continues producing the
• 10:31
  cells at Giga, Texas. The L&F contract was for raw
• 10:34
  materials, not finished cells. But the collapse suggests Tesla
• 10:38
  will not achieve the cost reductions that would have
• 10:42
  justified significant price cuts or performance improvements.
• 10:46
  Revolutionary battery economics Musk promised in 2020 are not
• 10:49
  coming five years after Battery Day.
• 10:52
  The 4680 is a technology confined to a low volume truck
• 10:56
  that cannot find buyers. It's not a Holy Grail, it's a
• 11:00
  failed experiment. Still looking for a purpose.
• 11:04
  And if Elon Musk has his way, he will reinvent the 4680 and build
• 11:10
  a new battery. And what that is going to be,
• 11:13
  I'm going to have to wait and find out.
• 11:16
  Hey, thank you so much for listening today.
• 11:17
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• 11:19
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• 11:33
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• 11:39
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• 11:41
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