LG Energy Solution's 2nd Quarter Profit Below Expectations Due to EV Slump

TapTechNews July 8th news, the profit of South Korean battery maker LG Energy Solution Ltd. in the second quarter was lower than analysts' expectations due to the continuous slump in electric vehicle sales.

LG Energy Solution's 2nd Quarter Profit Below Expectations Due to EV Slump_0

According to the company on Monday, in the three months ending June 30, operating profit fell 58% year-on-year to 195.3 billion won (TapTechNews note: about 1.031 billion yuan currently). Data compiled by Bloomberg showed that analysts had previously expected 282 billion won. Excluding the tax credit brought by the US Inflation Reduction Act, LG's operating loss was 252.5 billion won (about 1.333 billion yuan currently). Revenue also dropped by 30% to 6.2 trillion won (about 32.742 billion yuan currently) in that quarter.

This is a preliminary report, and LG will announce the final results later this month. The company's share price once fell by 1.4% after the results were released, and is now basically flat.

As a supplier to automakers such as Tesla and General Motors, LG Energy Solution is facing the dual pressure of the slowdown in electric vehicle sales and the decline in lithium prices, and the decline in lithium prices also affects the price of its batteries. Due to high interest rates suppressing demand, automakers are also forcing battery manufacturers to provide cheaper batteries to reduce the price of electric vehicles. Meanwhile, LG's global market share in the electric vehicle battery market is also declining due to the rise of Chinese competitors.

According to data from SNE Research, Tesla's global market share in the electric vehicle market as of the end of May this year has dropped to 11.1%, compared to 14.8% in the same period last year. This indicates that Tesla's outdated model lineup is struggling to keep up with updated products from competitors. In Europe, companies such as Volkswagen Group, Stellantis Group, and Mercedes-Benz Group are either downsizing or readjusting battery projects.

Seoul Hyundai Motor Securities analyst Dongjin Kang said: The price of electric vehicle batteries has dropped by nearly $50 per kWh from the peak to about $100 per kWh. This means that the battery cost of General Motors' electric SUV Equinox has dropped by nearly $4,000. Currently, automakers have no reason to buy batteries as they are still waiting for the battery price to drop further in the second half of the year.