Battery maker LG Energy Solution Ltd. reported a significant decline in its second-quarter profit, falling short of analyst expectations due to a continuing slowdown in electric vehicle (EV) sales worldwide.
For the three months ending June 30, LG Energy Solution’s operating profit dropped by 58% from the previous year, totaling 195.3 billion won ($141 million). This figure was significantly lower than the 282 billion won estimated by analysts, as reported by Bloomberg. Without accounting for a tax credit from the US Inflation Reduction Act, LG Energy Solution recorded an operating loss of 252.5 billion won. Revenue also saw a sharp decline, falling 30% to 6.2 trillion won.
The Seoul-based company, which supplies batteries to major automakers such as Tesla Inc. and General Motors Co., has been grappling with reduced EV sales and a decrease in lithium prices affecting its selling prices. Additionally, car manufacturers have been pressuring battery suppliers to reduce cell prices to make EVs more affordable amid high interest rates that are dampening demand. Compounding these issues, LG Energy Solution has been losing market share in the global EV battery sector to Chinese competitors.
Tesla’s global EV market share fell to 11.1% through the end of May this year, down from 14.8% last year, according to SNE Research. The carmaker’s older models are facing tough competition from newer offerings by rivals. In Europe, companies like Volkswagen AG, Stellantis NV, and Mercedes-Benz Group AG are scaling back or refocusing their battery projects, further impacting demand.
“The price of batteries for EVs slumped by almost $50 per kilowatt-hour from its high to around $100,” said Dongjin Kang, an analyst at Hyundai Motor Securities Co. in Seoul. “This means the battery cost fell nearly by $4,000 for GM’s electric SUV Equinox. There’s no reason for carmakers to purchase batteries at the moment; they are still waiting for the price to fall further in the second half.”
The preliminary report from LG Energy Solution indicates a challenging period ahead, with final results expected later this month. Following the announcement, LG Energy shares dropped as much as 1.4% before stabilizing.
For more details, visit the original article on Bloomberg here.