LG Energy Solution Expects Significant Profit Growth in Q2 Despite EV Sales Slowdown

LG Energy Solution, a battery supplier for General Motors and Tesla, announced on July 7 its expected operating profit for the second quarter of this year. Despite a global slowdown in electric vehicle (EV) sales leading to a forecasted revenue decline from 61.6 trillion KRW (approximately $45.06 billion) last year to 55.6 trillion KRW, the company's operating profit is expected to surge by 152% year-on-year to 492.2 billion KRW, significantly exceeding last year's profit of 195.3 billion KRW and analyst expectations of 294 billion KRW compiled by LSEG SmartEstimate. Notably, this profit forecast does not account for tax credits provided by the U.S. Inflation Reduction Act, from which the company has benefited through the Advanced Manufacturing Production Tax Credit (AMPC). In the second quarter, LG Energy Solution received a total tax benefit of 490.8 billion KRW from the AMPC. Excluding this tax incentive, the company's operating profit would be just 1.4 billion KRW, marking the first profit since Q4 2023 without subsidies. LG Energy Solution's spokesperson stated, 'Thanks to the increase in battery product shipments to the U.S. market from clients like Hyundai, Kia, and General Motors, our profits will see a significant boost in the second quarter.' The company is expected to release its final financial results for Q2 later this month. LG Energy Solution also attributed its profit improvement to an increase in high-margin product sales to North American clients, the launch of local Energy Storage System (ESS) battery production, and ongoing cost reduction measures. Last month, the company began mass production of lithium iron phosphate (LFP) batteries for ESS at its plant in Holland, Michigan. Despite uncertainties in customer demand, LG Energy Solution plans to enhance its profits in the second half of this year by increasing production of new battery types for European EV manufacturers and expanding local ESS production in North America. The company will also focus on reducing costs, prioritizing high-margin EV sales, and leveraging U.S. production facilities to quickly meet ESS demand. Senior analyst Lee Jin-myung from Shinhan Securities stated, 'Following inventory adjustments in Europe, the gradual initiation of replenishment demand and increased supply of LFP materials are expected to boost LG Energy Solution's battery capacity utilization. Sustained strong demand for ESS, along with ramping up production capacity at North American plants, could significantly enhance LG Energy Solution's profit contributions.' Industry analysts noted that the substantial increase in LG Energy Solution's operating profit in Q2 is likely primarily due to additional demand for batteries from automakers. Concerns over potential U.S. tariff policies have led many automakers to procure batteries in advance to ensure supply chain stability. Additionally, automakers may be betting on a recovery in EV market demand, prompting early battery purchases.