Tesla has backed away from terminating its supply deal with Australian graphite producer Syrah Resources. The decision comes after Syrah demonstrated progress in meeting product qualification requirements. Tesla accepted that Syrah had produced conforming natural graphite active anode material samples and made sufficient progress to tackle an alleged default under their offtake agreement.
Qualification Work Continues
Tesla’s decision does not eliminate all uncertainty, as the automaker still retains the right to terminate the agreement if Syrah fails to secure final qualification approval. Syrah is currently in the advanced stages of qualification testing and approvals for material produced at its Vidalia facility in Louisiana.
Why The Deal Matters
Under a supply agreement signed in 2021, Syrah is expected to provide Tesla with 8,000 metric tons of natural graphite active anode material from the facility over four years. Maintaining the Tesla relationship removes a near-term uncertainty for Syrah as it works toward commercial-scale production and customer qualification. The deal gives Tesla access to a U.S.-based source of graphite anode material, a key battery component, helping reduce its reliance on China-dominated supply chains.
A Long-Running Dispute
The companies had been working through the issue for months, with Tesla and Syrah in March extending the deadline to resolve the alleged default for a fourth time, giving the graphite producer until June 1 to address qualification concerns. Risks remain if Syrah is unable to secure final qualification approval.
Market Reaction
Syrah stock popped over 23% to AUD 0.12 ($0.09) following the announcement, while Tesla’s shares closed 1.4% lower. The development is a significant boost for Syrah, which is working to establish itself as a reliable supplier of graphite anode material to the electric vehicle industry.
Key Takeaways
- Tesla has reconsidered its decision to terminate the supply deal with Syrah Resources
- Syrah has demonstrated progress in meeting product qualification requirements
- The deal is significant for both companies, with Syrah providing Tesla with a U.S.-based source of graphite anode material
- Risks remain if Syrah is unable to secure final qualification approval