Tesla has officially backed off its threat to kill a graphite supply agreement with Australia’s Syrah Resources, ending a nearly year-long standoff over product quality that had cast serious doubt on one of the few non-Chinese sources of battery-grade anode material in the Western hemisphere.
Syrah announced on May 31 that Tesla withdrew its termination notice after accepting that conforming samples of natural graphite active anode material had been produced at Syrah’s Vidalia processing facility in Louisiana. Syrah shares surged as much as 38% on the news. Tesla’s stock barely moved.
How a quality dispute almost derailed the deal
The supply agreement dates back to 2021, when Tesla committed to purchasing 8,000 metric tons of natural graphite anode material per year over a four-year period. The deal was designed to give Tesla a reliable, domestically processed source of a material that is absolutely essential for lithium-ion batteries, and one that China has historically dominated.
Things started going sideways in July 2025, when Tesla issued a default notice claiming that sample quality from the Vidalia plant wasn’t meeting required standards.
