As demand in China for U.S. electric-vehicle maker Tesla rebounds, L&F, a domestic cathode materials company whose largest customer is Tesla, is drawing attention. With expectations growing that it will swing to a profit in the third quarter this year for the first time in two years, sales of Tesla models aimed at the Chinese market are increasing and new model launches are overlapping, suggesting a period of strong results ahead.
Tesla's sales in China rebounded in three months as the six-seat sport utility vehicle (SUV) "Model YL" gained popularity. The Model YL, for which full-scale deliveries began on the 0th, is a long-wheelbase model (an expanded interior version) adapted from the existing Model Y, and all units allocated for this month's sales have sold out. Orders received on launch day alone totaled about 35,000 units.
The success of the Model YL, which targets family-car demand in China, is also raising interest in the performance of domestic cathode materials company L&F. L&F's cathode materials are used in the LG Energy Solution NCM (high-nickel) batteries installed in the Model YL. The Model YL is also scheduled for a global market launch next year.
L&F's cathode materials are also used in the new Model Y Juniper, which is gaining popularity in Korea. Ahead of its domestic release, Juniper has begun full-scale sales in China and has been steadily increasing deliveries. In China, Juniper received 50,000 preorders on its first day of release alone, and 59,907 units were sold on the 0th, making it No. 1 in sales ahead of local brands such as BYD and Geely.
In addition to the Model YL and Juniper, which Tesla introduced targeting the Chinese market, L&F's cathode materials have also been adopted in the battery installed in the new long-range trim Plus (+) of the Model 3. The Model 3 Plus has a driving range about 30% longer than the existing Model 3 and can travel up to 830 km on a single charge under China's CTLC certification. Next year, Tesla is expected to release the Model Y Plus, which extends the driving range of the Model Y.
L&F is expected to return to the black in the third quarter this year for the first time in about two years, helped by Tesla's success in China. L&F posted losses for seven consecutive quarters from the fourth quarter of 2023 through the second quarter this year. The third-quarter sales consensus (average estimate) for this year is 668 billion won, up about 90% from a year earlier, with operating profit at 7.7 billion won.
If Tesla continues its strong sales in China and rolls out its locally tailored models to global markets, L&F's cathode materials shipments are expected to increase for some time. The mass production of lithium iron phosphate (LFP) cathode materials, which ramps up next year, is also cited as a factor supporting results. L&F plans to complete its LFP cathode materials plant in the first half of next year and begin mass production in the second half. Demand for LFP cathode materials is on the rise, centered on mid- to low-priced electric vehicles and energy storage systems (ESS).