(Bloomberg) -- LG Energy Solution Ltd. slashed its annual sales target and second-quarter earnings missed analyst estimates, as the South Korean battery maker grapples with slowing demand for electric vehicles.
Sales will decline at least 20% this year compared to last year, the Seoul-based company said Thursday, reversing a previous forecast of about 5% growth. The company’s shares fell as much as 2.6% in early trading to the lowest since LG Energy listed in January 2022.
Much of the decline will come in a reduction of tax credits LG Energy receives for producing batteries in the US. It now expects to be credited for producing 30-to-35 gigawatt-hours of batteries, down from 45-to-50 gigawatt-hours in its previous forecast.
Overall, the company posted a 23.7 billion won ($17 million) net loss for three months ended June 30, compared to analyst estimates of a 13 billion won profit, according to data compiled by Bloomberg. Revenue and operating profit matched LG’s preliminary results announced earlier this month.
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Carmakers are winding back their EV ambitions as demand wanes, leading to lower orders for batteries. On Wednesday, Tesla Inc. reported another quarter of disappointing profit and confirmed the delay of its autonomous taxis. Porsche AG earlier this week walked back its target for EVS to account for 80% of new car sales by, while General Motors Co. Chief Executive Officer Mary Barra has also watered down expectations for her company’s EV program.
“The EV market is slowing more than our expectations,” LG Energy’s Chief Financial Officer Chang Sil Lee said on a call with analysts. “Carmakers are adjusting the pace for electrification and focusing on hybrids in the short term.”
“We’ll ensure we only execute new capital expenditure strategically in areas that are absolutely necessary,” he added.
LG Energy also lowered its outlook for US EV output growth this year to around 20% from as much as 35% in its previous forecast, and cut its outlook for European EV production growth to the mid-teens from up to 25%.
To minimize the impact from slowing EV demand, the company is trying to sell batteries for other applications such as energy storage systems. On Tuesday, the company said it may start to build energy storage systems at its Poland plant amid weaker demand for EVs on the continent.
The battery maker also cited rising poltical uncertainty ahead of the US presidential election, with Donald Trump threatening to scrap Joe Biden’s EV policies.
“If a non-Democrat wins the election, there’s a possibility that EV demand may get weaker,” Chief Strategy Officer Chang Beom Kang said. “But the move for curbing China’s entry into the US is bipartisan, so it will be advantageous for us in terms of competing with Chinese rivals in the US.”
--With assistance from Heesu Lee.
(Adds company comment in sixth paragraph.)
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