The second-quarter profit of LG Energy Solutions (LGES), a South Korean battery company, fell by 58% year-on-year due to weak demand for electric vehicles.

In addition, LG Energy Solutions also expects its sales in 2024 to decline by more than 20% year-on-year, and will slow down its production capacity expansion.

Slowdown in demand for electric vehicles

LG Energy Solutions, a subsidiary of LG Chem Ltd, supplies batteries to Tesla, General Motors, Hyundai, and other automakers.

The company's second-quarter report shows that operating profit from April to June this year was 195 billion won ($0.141 billion), consistent with previous forecasts. In contrast, profit for the same period last year was 461 billion won. Revenue in the quarter also decreased by 30% year-on-year to 6.2 trillion won ($4.476 billion).

LGES also stated in a regulatory filing that it would post a 253 billion won operating loss this quarter unless it gains some tax breaks under the US Inflation Reduction Act (IRA).

The company predicts that the growth of the global electric vehicle market this year will slow down from last year's 36% to slightly above 20%, particularly evident in the United States and Europe.

Given the trend of the slowing electric vehicle demand, LG Energy Solutions expects its overall revenue in 2024 to decline by more than 20% year-on-year. The company's previous goal was to achieve an annual revenue growth of around 1% this year. The company's sales revenue in 2023 was 33.7 trillion won.

LGES also said in its financial report that "in the second half of the year, we will adjust the new pace of expansion, or reduce investment in some projects, while making the fullest use of our existing production capacity."

As of press time, the company's stock price rose by 2.95% in the Tuesday morning session. However, the company's stock price has cumulatively fallen by nearly 23% so far this year.