LG Energy Solution Ltd. (LGES), South Korea’s leading battery maker, said Thursday it shifted to a net loss in the second quarter due to slowing sales of electric vehicles (EVs).
In the three months ended in June, LGES swung to a net loss of 23.7 billion won (US$17 million) from a net profit of 465.1 billion won in the same period of last year, the company said in a statement.
The EV sales slowdown and lower metal prices, which affect car battery prices, weighed on the quarterly bottom line, LGES Chief Financial Officer Lee Chang-sil said in the company’s earnings conference call.
“The slowdown in the EV market is expected to last longer than expected amid growing uncertainties in the market, such as the U.S. presidential election,” Lee said, adding the company will be closely watching the market conditions and focus on its customers’ demands.
LGES sees the global EV market has entered a stagnation phase, known as the “chasm,” which occurs before the widespread adoption of pure electric cars.
Operating p
rofit plunged 58 percent to 195.3 billion won in the second quarter from 460.6 billion won a year earlier. Sales fell 30 percent to 6.16 trillion won from 8.77 trillion won during the cited period.
LGES expected its overall sales will fall by more than 20 percent this year compared with 33.75 trillion won earned last year. The company projected a mid-single-digit growth in sales early this year.
The company also expected 30-35 gigawatt-hour (GWh) batteries will benefit from U.S. tax credits under the Inflation Reduction Act (IRA) this year, which is down from its previous forecast of 45-50 GWh batteries.
The IRA, signed into law by U.S. President Joe Biden in August 2022, requires 50 percent of the value of battery components to be assembled in North America to receive a $3,750 credit and 40 percent of the value of critical minerals sourced from the United States or a free trade partner for a separate $3,750 credit.
To flexibly respond to slowing market demands, “LGES will adjust the speed of overall inve
stment and seek ways to increase investment flexibility and efficiency,” LGES Chief Executive Officer Kim Dong-myung said in the statement.
In North America, LGES currently operates three battery cell plants — the first and second plants under a joint venture (JV) with GM, and one in Holland, Michigan. Plants under JVs with GM, Hyundai Motor Co., Honda Motor Co. and Stellantis N.V. are being constructed in the U.S. states of Michigan, Georgia and Ohio, as well as Ontario and Canada, respectively.
LGES said it will begin operations of its 49 GWh plant under a JV with Stellantis in the second half.
In other regions, the company has plants in South Korea, Poland and China, with a plant set to start production in Indonesia in the second half of 2024.
Source: Yonhap News Agency