LG Energy Solution Q1 Profit Surges 138% on IRA Tax Credit, Despite EV Market Slowdown

South Korea's LG Energy Solution (LGES) reported a 138% jump in first-quarter operating profit, boosted by a favorable currency exchange and tax incentives under the U.S. Inflation Reduction Act (IRA), despite slowing electric vehicle (EV) demand in major global markets.

The battery maker, which supplies industry leaders such as Tesla, General Motors, and Hyundai, posted a Q1 operating profit of 375 billion won ($261.96 million), up sharply from 157 billion won a year ago and matching earlier guidance. Revenue rose 2.2% year-on-year to 6.3 trillion won.

A key factor behind the surge was the U.S. IRA tax credit. Without this incentive, LGES said it would have recorded an 83 billion won operating loss, highlighting the significant impact of U.S. policy on Korean EV battery suppliers. The credit continues to play a crucial role in offsetting weaker growth in EV sales abroad, particularly in the U.S. and Europe where demand has plateaued amid high interest rates and inflationary pressures.

Despite the strong earnings, LGES shares fell 2.1% in morning trading, underperforming the broader KOSPI index, which edged up 0.1%. Investors may have reacted to the modest revenue growth and the company’s dependency on temporary policy support to maintain profitability.

As competition intensifies in the global battery market, LGES remains focused on expanding its manufacturing capacity and securing long-term supply deals to weather industry headwinds. Analysts will be closely watching how LGES adapts to shifting EV market dynamics and geopolitical policy changes, especially with growing U.S.-China tensions in the clean tech supply chain.

The results underscore the growing influence of government incentives in shaping the profitability of EV-related firms amid an evolving global energy transition.