Tesla Inks $2.9B Battery Material Supply Deal With South Korean Partner: Why It's Important For The EV Giant

South Korean battery materials supplier L&F Co signed a contract with Tesla Inc. (NASDAQ:TSLA) for KRW 3.83 trillion or $2.9 billion to supply materials.

What Happened: L&F Co, in a regulatory filing on Tuesday, revealed the details of its contract with Tesla. The deal is for two years, starting from Jan. 1, 2024, to Dec. 31, 2025, stated L&F Co.

The deal would further expand the U.S. electric vehicle giant’s battery manufacturing capabilities.

See Also: Everything You Need to Know About Tesla Stock

L&F Co will supply Tesla with high nickel cathode materials, which are important in manufacturing EV batteries — making this new contract a key element towards Tesla’s attempts at manufacturing its own batteries and reducing dependence on other suppliers such as Contemporary Amperex Technology Co., Limited, or CATL, and Panasonic (OTCPK: PCRFF).

Apart from Tesla, China-headquartered CATL also supplies batteries to other EV makers such as Nio Inc. (NYSE:NIO). Earlier this month, Ford Motor Company (NYSE:F) made a $3.5 billion investment to build the United States' first lithium iron phosphate battery plant with the leading battery maker.

Why It’s Important: The battery is the key and most expensive component of an EV and 2022 saw supply chain challenges and a spike in input costs amid geopolitical tensions. Tesla is more vertically integrated than any other car manufacturer. Rumors suggested earlier this month the Elon Musk-led company is looking to buy lithium miner Sigma Lithium Corp. (NASDAQ:SGML).

Australian miner Magnis Energy Technologies announced a deal with Tesla earlier this month to supply battery materials. The supply arrangements will likely help the company ramp up production.

Price Action: Tesla shares were rising 1.93%, to $211.64, in premarket trading on Tuesday, according to Benzinga Pro data.

Read Next: Tesla Said To Be Inching Close To Mexico Investment Deal After Musk’s Call With President