LG Energy logs 1st quarterly loss in over 3 years, outlook remains gloomy

LG Energy Solution Ltd. reported its first quarterly loss in more than three years on Thursday, adding to concerns that the world’s third-largest battery maker is expected to face further pressure from global moves to cut subsidies for electric vehicles.

LG Energy said it logged an operating loss of 225.5 billion won ($154.8 million) in the fourth quarter of 2024, swinging from a profit of 338.2 billion won a year earlier, as sales fell 19.4% to 6.5 trillion won.

The shortfall came despite the South Korean company receiving 377.3 billion won in US tax benefits under the Advanced Manufacturing Production Credit (AMPC) program during the October-December 2024 period.

LG Energy last reported a quarterly loss in the third quarter of 2021 when the company set aside 620 billion won for costs related to General Motors Co.’s recall of Bolt EVs equipped with the cell producer’s batteries.

After the quarterly earnings, LG Energy’s stock ended down 4% at 358,500 won, the lowest close since Jan. 3, while the South Korean benchmark Kospi barely changed.

“It is inevitable to cut expectations of operating profits and production capacity due to demand uncertainty,” Shinhan Securities Co. said in a note.

The brokerage lowered its target price of LG Energy’s stock by 13% to 470,000 won despite its prediction that the company’s earnings will improve at the fastest pace among its peers, given its advanced products, when the global EV market improves.

GLOBAL MOVES TO SLASH EV SUBSIDIES

LG Energy’s operating profit in 2024 tumbled 73.4% to 575.4 billion won as the annual revenue fell 24.1% to 25.6 trillion won with slowing sales of key customers such as the world’s No. 2 EV maker Tesla Inc. and GM.

In the fourth quarter, the battery prices fell from the previous three months as sales of LG Energy’s major clients declined in the world’s three largest EV markets – China, Europe and the US.

LG Energy cut runs of its US factories on lower sales of GM EVs. That reduced the tax incentives under the AMPC program, which allows eligible battery makers to collect tax benefits, including a $35 tax credit per 1 kilowatt-hour produced by a battery cell and a $10 tax credit per 1 kWh battery module manufactured in North America.

European EV makers struggled to compete with Chinese rivals’ rapid expansion, while Tesla’s EV inventory increased in China due to local makers’ growth.

The global EV market is unlikely to recover this year as authorities in Europe and the US are expected to reduce subsidies for the clean automobiles, industry sources in Seoul said.

US President-elect Donald Trump’s transition team is seeking to eliminate federal incentives for EVs and European countries are also slashing benefits.

Such moves are expected to force EVs to lose price competitiveness compared with internal combustion engine vehicles.

LG Energy CEO Kim Dong-myung last November said the industry was expected to stay sluggish this year and recover in 2026.

The company took cost-cutting measures last month.

Write to Hyung-Kyu Kim at khk@hankyung.com
 
Jongwoo Cheon edited this article.