Battery maker LG Energy Solution Ltd. reported a significant drop in its second-quarter profit as the electric vehicle (EV) market faces a global slowdown.
Operating profit for the three months ended June 30 decreased by 58% year-over-year to 195.3 billion won ($141 million), missing analyst expectations of 282 billion won, according to Bloomberg. Excluding a tax credit from the US Inflation Reduction Act, the company actually faced a 252.5 billion won operating loss. Revenue also declined 30% to 6.2 trillion won.
The downturn comes as LG Energy, a key supplier for automakers such as Tesla Inc. and General Motors Co., grapples with reduced EV sales and a drop in lithium prices, which are linked to the company’s selling prices. Automakers have been pushing battery producers to provide cheaper cells to reduce EV prices, as high interest rates have negatively impacted demand. Concurrently, LG Energy is losing market share to growing Chinese competitors.
The company’s stock dipped by as much as 1.4% following the preliminary results announcement and remained largely unchanged later in the day. The final results for the quarter are expected to be released later this month.
Tesla’s share of the global EV market fell to 11.1% this year through the end of May, down from 14.8% last year, according to SNE Research. This decline is attributed to the company’s older models struggling to compete with newer offerings from rivals. Meanwhile, in Europe, companies such as Volkswagen AG, Stellantis NV, and Mercedes-Benz Group AG are either scaling back or refocusing their battery projects.
“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 current scenario highlights the challenges faced by the EV industry as it navigates fluctuating market dynamics and intense competition. LG Energy’s strategic responses and adjustments in the upcoming quarters will be crucial in determining its future position in the global market.
For more details, read the full article on Bloomberg.