LG Energy Solution posts 152% growth in profit on upbeat US sales
According to the company's earnings report, it achieved profitability for the first time in six quarters, excluding financial benefits from the Advanced Manufacturing Production Credit under the US Inflation Reduction Act (IRA). However, sales revenue declined by 9.7 percent, amounting to 5.6 trillion won.
This decline was primarily due to decreased purchases from automakers outside of North America, resulting from increased policy volatility, particularly concerning US tariffs.
'As North America and Europe both focus on expanding their domestic battery supply chains and domestic production, preference for battery companies capable of local supply and stable operations — such as LG Energy Solution — is expected to increase significantly,' said Kim Chang-sil, chief financial officer of LG Energy Solution, during a conference call earlier in the day.
Highlighting its first-mover initiative in establishing the first ESS battery production site in North America, Kim noted that the company looks to offset the slowdown in EV battery sales with ESS products. This focus is on the fast-growing North American power grid market, with an emphasis on artificial intelligence data centers.
In May, LG Energy Solution began mass production of LFP-based long pouch cells for ESS at its Michigan facility in the US. It has secured orders exceeding 50 gigawatt-hours from global energy firms, with joint ventures with global carmakers prioritizing a portion of their capacity for ESS supply. Aiming to reach 17 gigawatt-hours capacity by the end of this year, the battery-maker will expand to 30 gigawatt-hours by 2026 by converting EV production lines to ESS lines.
Addressing the enactment of the One Big Beautiful Bills Act by the Trump administration earlier this month, LG Energy Solution believes that the North American EV market may experience a temporary demand slowdown. However, the new 'prohibited foreign entity' regulations, which restrict energy companies influenced by Chinese firms from receiving tax credits when investing in the US, could partly benefit the company.
'The new PFE procurement requirements are more relaxed than the foreign entity of concern requirements under the IRA, offering an opportunity to optimize our US supply chain,' said Lee Yeon-hee, head of the business strategy division at LG Energy Solution.
'A certain percentage can be sourced from PFEs, and as PFE restrictions are limited to direct material costs, we can leverage more cost-effective supply chains for some materials.'
LG Energy Solution also plans to accelerate the launch of battery cells for rapidly emerging low-cost EVs.
To target the expanding European market for mid- to low-priced EVs, the company is preparing to mass-produce high-voltage mid-nickel and lithium iron phosphate cells at its Poland plant. Notably, LFP products are set to boost cost-competitiveness by incorporating advanced manufacturing methods, including a solvent-free dry electrode process and fast-charging technologies.
For the North American market, LG Energy Solution is collaborating with General Motors to develop lithium manganese-rich prismatic cells for their next-generation EVs in 2028. These products offer similar costs to LFP while delivering over 30 percent higher energy density. Upon reaching mass production, the LMR batteries are being reviewed for the phase 2 joint venture in Tennessee. The existing nickel, manganese and cobalt batteries will be exclusively manufactured in the phase 1 joint venture in Ohio.
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