LG Energy Solution Predicts Slowing Growth in Global Electric Vehicle Market

South Korean battery maker LG Energy Solution (LGES) forecasts a deceleration in this year's global electric vehicle (EV) market growth. This projection highlights the escalating competition from Chinese rivals, which poses further challenges for the company.

Reuters noted that LGES supplies distinguished automakers such as Tesla, General Motors, and Volkswagen. In October-December, the operating profit soared to 338 billion won ($252 million), surpassing the previous year's 237 billion won.

Profit Exceeds Estimates Despite Weak Demand in Europe

Newswav reported that although the reported profit aligns with the company's forecast, it outperforms the 298 billion won estimate by LSEG SmartEstimate, which emphasizes consistently accurate analysts. However, the profit for the fourth quarter plummeted by over 50% compared to the previous quarter due to subdued demand for EVs in Europe.

LGES attributes this decline to original equipment manufacturers' conservative inventory control and the continuous decline in metal prices.

LGES notes several risk factors to be navigated in the coming year. These include automakers' fluctuating pace of EV transition plans, intensifying competition in Europe, and political uncertainties related to events such as the U.S. presidential election.

This year's market outlook suggests a mid-20 percent growth range for the global EV market, influenced by the North American market, which is projected to grow within the low to mid-30 percent range.

Tesla's Warning and Hyundai's Caution Reflect Market Sentiment

LGES' market forecast aligns with cautionary statements made by automakers. Tesla recently alerted us of a sharp deceleration in car sales growth this year. Similarly, Hyundai Motor Co has also highlighted the slowing sentiment of the EV market. These indications from key players reflect the potential challenges for LGES and the industry.

LGES aims to achieve mid-single-digit revenue growth this year. Additionally, the company anticipates capital expenditure similar to the previous year's 10.9 trillion won. The anticipated battery production capacity eligible for U.S. Inflation Reduction Act tax credits is an exciting development. This year, the capacity is expected to range from 45-50 gigawatt hours (GWh), demonstrating a notable increase compared to the previous year.

Notably, the revenue for the quarter dipped by 6.3% year-on-year, amounting to 8 trillion won. Despite this decline, LGES experienced a surge in its stock, with shares trading up by 4.9% in morning trade. Such a positive market response suggests optimism surrounding the company's quarterly results. In comparison, the benchmark KOSPI witnessed a modest rise of 0.9%.

Photo: LG Energy Newsroom