Battery maker LG Energy Solution Ltd. reported a significant decline in its second-quarter profits, reflecting the ongoing challenges in the electric vehicle (EV) market. The company’s operating profit for the three months ending June 30 dropped 58% year-over-year, amounting to 195.3 billion won ($141 million), missing analyst expectations of 282 billion won.
This stark decline is primarily attributed to slowing EV sales and a sharp reduction in lithium prices, which directly impacted the selling prices of batteries. Revenue for the same period fell 30% to 6.2 trillion won. Excluding a tax credit from the US Inflation Reduction Act, LG Energy reported an operating loss of 252.5 billion won.
LG Energy’s struggles are further compounded by increasing pressure from automakers like Tesla Inc. and General Motors Co. These companies are demanding cheaper battery cells to make EVs more affordable amid high interest rates that are dampening consumer demand. Additionally, LG Energy is losing market share to burgeoning Chinese competitors.
The supplier to major automakers has seen its market position wane. Tesla’s share of the global EV market, for instance, dropped to 11.1% this year through May, down from 14.8% last year, according to SNE Research. The company’s older EV models are struggling to compete with newer offerings from rivals. In Europe, automakers such as Volkswagen AG, Stellantis NV, and Mercedes-Benz Group AG are either scaling back or refocusing their battery projects.
Dongjin Kang, an analyst at Hyundai Motor Securities Co., highlighted the significant price drop in EV batteries: “The price of batteries for EVs slumped by almost $50 per kilowatt-hour from its high to around $100. It 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.”
LG Energy’s shares fell by as much as 1.4% following the release of these preliminary results and recently were little changed. The company will announce its final results later this month.
The global slowdown in EV sales and the ensuing price war among battery manufacturers signal a challenging period ahead for LG Energy Solution Ltd. As the market dynamics continue to evolve, the company will need to navigate these pressures to regain its footing.