In a recent announcement, LG Energy Solution (LGES), a leading South Korean battery manufacturer supplying major automakers like Tesla, General Motors, and Volkswagen, projected a slowdown in the growth of the global electric vehicle (EV) market for the upcoming year. The forecast indicates heightened competition from Chinese counterparts and various challenges ahead for the industry.
For the October-December period, LGES reported an operating profit of 338 billion won ($252 million), showcasing an increase from the same period a year earlier, where the profit was 237 billion won. While this aligns with the company’s forecast, it surpassed the estimate by LSEG SmartEstimate, standing at 298 billion won, which is usually based on analysts with consistently accurate predictions.
However, the fourth-quarter profit witnessed a noticeable drop compared to the previous quarter, primarily due to subdued demand for electric vehicles in Europe. LGES attributes this anticipated temporary slowdown in global EV battery demand growth to original equipment manufacturers’ (OEMs’) cautious inventory management practices and ongoing declines in metal prices.
The company highlighted several risk factors for the current year, including the evolving pace of EV transition plans by automakers, heightened competition in Europe, and political uncertainties such as the US presidential election.
LGES’s market outlook for the year projects mid-20 percent range growth for the global EV market, influenced by factors such as anticipated low to mid-30 percent range growth in the North American market. The company aims for mid-single percentage revenue growth this year, with capital expenditure expected to remain similar to the previous year’s figure of 10.9 trillion won.
Notably, LGES mentioned that the estimated battery production capacity eligible for US Inflation Reduction Act tax credits would be around 45-50 gigawatt-hours (GWh) this year, more than double the previous year’s capacity.
Despite a 6.3 percent year-on-year decline in revenue for the quarter, LGES’s shares surged by 4.9 percent in morning trading following the quarterly results, outperforming the benchmark KOSPI, which rose by 0.9 percent.
