LG Energy Solution (LGES), a South Korean battery manufacturer, announced a projected first-quarter operating loss of 208 billion won (approximately $192 million CDN) due to decreased demand from electric vehicle (EV) manufacturers. This figure is higher than the forecasted loss of 160 billion won by LSEG SmartEstimate. The company supplies batteries to major automakers like Tesla, General Motors, and Hyundai Motor, but has been facing challenges with declining EV battery demand. GM, one of LGES’s key customers, recently halted operations at a Detroit EV plant until April.
LGES anticipates a 2.5% decline in revenue to 6.6 trillion won compared to the previous year. The quarterly earnings guidance includes tax credits granted under the U.S. Inflation Reduction Act for the company’s U.S.-based battery production. Excluding these credits, LGES would have reported an operating loss of 398 billion won.
To counterbalance the EV battery downturn, LGES is shifting its focus towards meeting the increasing demand for energy storage systems (ESS), driven by the growing electricity needs of AI data centers. The company aims to triple its ESS revenue this year and is projected to reach around 2.8 trillion won in ESS revenue by 2025.
Furthermore, the introduction of the CHARGE Act in the U.S. House, aimed at restricting imports of certain Chinese-made energy storage systems, could present new opportunities for South Korean battery manufacturers like LGES. The bill raises concerns about potential remote monitoring capabilities in energy storage systems imported from China.
LGES, the parent company of NextStar Energy in Windsor, Ontario, initially established a battery cell factory for the EV market. However, due to the declining EV sector, the focus has shifted towards energy storage systems. The facility is now equipped to produce batteries for both industries. Canadian governments have pledged up to $16 billion in subsidies to NextStar, which was originally a collaboration between automaker Stellantis and LG Energy Solution.
Detailed earnings for LGES are expected to be reported on April 30.