The sustained slowdown in electric vehicle market sales has significantly affected the performance of battery manufacturer LG new energy, leading to its second quarter profit falling short of analyst expectations.
The continued slowdown in the electric vehicle market has had a significant impact on the performance of battery manufacturer LG new energy, leading to a sharp decline of 58% in second quarter operating profit year-on-year, reaching only 195.3 billion won (approximately 0.141 billion US dollars), far below the market's expected 282 billion won. After deducting the tax credits offered by the US 'Inflation Reduction Act', LG New Energy actually reported a operating loss of 252.5 billion won. The company's revenue also fell by 30% to 6.2 trillion won.
Although this is only a preliminary performance report, LG new energy plans to release an audited official financial report later this month. Interestingly, in early trading on the Korean market on Monday, despite the market's usually cautious reaction to initial performance reports, LG new energy's stock price rose against the trend, rising 1.8% and showing investors' optimistic expectations for the company's future performance.
As a battery supplier for well-known automakers such as Tesla and General Motors, LG new energy is facing multiple challenges. The slowdown in electric vehicle sales and the decline in lithium prices tied to sales prices have put considerable pressure on it. The slowing demand in the high interest rate environment has put pressure on automakers to reduce battery costs in order to lower the price of electric vehicles. In addition, with the rise of Chinese competitors, LG new energy's share in the global electric vehicle battery market is gradually declining.
According to data from SNE Research, as of the end of May this year, Tesla's share of the global electric vehicle market has dropped from last year's 14.8% to 11.1%, partly because its old models are gradually losing their advantage in competition. In Europe, many companies, including Volkswagen, Stellantis NV, and Daimler Mercedes-Benz, are reducing or re-evaluating their battery projects.
Dongjin Kang, a Seoul analyst with Hyundai Motor Securities, pointed out: 'The price of electric vehicle batteries has fallen by nearly 50% from its peak, to around $100 per kilowatt-hour. For example, the battery cost of the General Motors electric SUV Equinox has dropped by nearly $4,000. Currently, automakers have no urgent reason to buy batteries, and they expect battery prices to fall further in the second half of the year.'
In the face of a complex situation where market demand is weakening, cost pressures are increasing, and market competition is intensifying, LG new energy's performance may continue to be under pressure in the short term. However, with the growing global demand for sustainable energy and clean transportation solutions, the electric vehicle and battery market still seem to have great long-term development potential.