Trends
LGES trims sales goal amid weak EV demand and US election risk
LGES slashes sales targets due to weak EV demand and US election risks, opting to scale back expansions and maximise current capacity. Despite the challenges, LGES shares have seen a rebound, jumping 4.2%. Shares in LGES rival Samsung SDI rose 3%, and SK Innovation, which owns battery maker SK On, g…
Headline
LGES slashes sales targets due to weak EV demand and US election risks, opting to scale back expansions and maximise current capacity. Despite the challenges, LGES shares have seen a rebound, jumping 4.2%. Shares in LGES rival Samsung SDI rose 3%, and SK Innovation, which owns…
Context
OUR TAKE LG Energy Solutions (LGES), a South Korean battery manufacturing giant, has been in the spotlight for its performance in the electric vehicle (EV) market. However, LGES recently announced its first quarter earnings report, which showed a significant decline in both revenue and profit. Against the backdrop of slowing global demand for electric vehicles, LGES’s financial performance and future strategic adjustments will undoubtedly become the focus of industry attention. In addition, as the U.S. election approaches and the trade friction between the U.S. and China continues, the response strategies of LGES and its customers to changes in the policy environment will also be an important factor affecting its development. –Elodie Qian, BTW reporter South Korea’s battery manufacturer LG Energy Solutions (LGES) has announced a significant revenue shortfall for the year, projecting a drop of over 20% due to a more pronounced deceleration in global electric vehicle (EV) demand than anticipated.
Evidence
Pending intelligence enrichment.
Analysis
The company, which counts Tesla, General Motors, and Hyundai Motor among its clientele, has also voiced concerns over the potential impact of the U.S. presidential election on EV policies and demand. “The outlook is likely to further dampen sentiment toward the global EV sector,” said Kang Chang Beom , LGES Chief Strategy Officer, during an earnings call with analysts. He added, “If the U.S. administration changes, there could be risk to EV demand growth.” The company has reduced its estimate for the U.S. federal tax credit it expects to receive this year under the Inflation Reduction Act to 30-35 gigawatt hours (GWh) from the initial 45-50 GWh, due to the demand slowdown. This indicates a possible decrease in profitability. LGES revealed that without the IRA tax credit, it would have recorded a second-quarter operating loss of 253 billion won ($182 million).
Key Points
- LGES slashes sales targets due to weak EV demand and US election risks, opting to scale back expansions and maximise current capacity.
- Despite the challenges, LGES shares have seen a rebound, jumping 4.2%. Shares in LGES rival Samsung SDI rose 3%, and SK Innovation, which owns battery maker SK On, gained 1.2%.
Actions
Pending intelligence enrichment.
