By Heekyong Yang and Ju-min Park
SEOUL (Reuters) – South Korean battery maker LG Energy Solution said on Monday it has a “conservative” view on sales growth next year and will significantly reduce capital spending due to declining demand for electric vehicles, following a third quarter of 39% profit decline.
The company, which supplies Tesla (NASDAQ:), General Motors (NYSE:) and Hyundai Motor (OTC:), also expects the outcome of next week’s US presidential election to have a significant impact on the direction of the EV market , said the CFO.
“Looking ahead to 2025, we see continued macro uncertainty and geopolitical risks, increased (battery) exports by Chinese rivals, as well as plans by customers (automakers) to produce their own batteries, which would intensify competition,” said Chief Financial Officer Lee Chang. Sil said during an earnings call.
“When it comes to sales growth next year, we have a rather conservative outlook,” Lee said. “We expect capital expenditures next year to be significantly reduced compared to this year, with the exception of some key and necessary investments.”
In April, LGES said it planned to cut capital spending this year due to slowing electric vehicle growth. Earlier this year, it was also said that capital expenditure in 2024 would be comparable to the previous year’s 10.9 trillion won.
Several automakers are scaling back electrification targets, hurt by declining demand for electric vehicles due to factors such as the lack of affordable models, the slow proliferation of charging points, trade tensions and increased competition from cheaper Chinese rivals.
Demand is likely to recover in about 18 months in Europe and two to three years in the United States, depending in part on climate policies and other regulations, a senior LGES executive told Reuters in July.
“The general view is that the pace of demand growth for electric cars could be slower if Donald Trump is elected to a second term in the White House (compared to under Kamala Harris), as he has proposed expanding electric vehicle tax credits cars,” said analyst Kang Dong. jin at Hyundai Motor Securities.
BEATS ESTIMATE
LGES reported an operating profit of 448 billion won ($322.84 million) for July-September, in line with its previous forecast but lower than the 731 billion won in the same period a year earlier.
However, improved demand from some European and North American automakers helped the battery maker beat the 374 billion won LSEG SmartEstimate, calculated based on the average of 20 analyst estimates and weighted by those analyst estimates that are more consistently accurate.
LGES said it would have posted an operating loss of 18 billion won in the quarter without a tax credit under the U.S. Inflation Reduction Act.
Revenue fell 16% to 6.9 trillion won.
LGES’ share price was up 1.2% after the results, better than a 0.9% rise in the benchmark.
($1 = 1,387.6900 won)
