LG Energy Solution (LGES) is cutting some investments after reporting weak earnings, mostly attributed to slow electric vehicle (EV) sales growth.
“We will have to cut capital expenditure considering sluggish EV market conditions and client demand,” commented Lee Chang-sil, LGES’ Chief Finance Officer.
The South Korean battery manufacturer reported an operating profit of 157.3 billion won (US$114 million). LGES’ operating profit plunged 75.2% compared to the previous year. It reported an operating loss for the first quarter, with the advanced manufacturing production credit (AMPC) from the Inflation Reduction Act (IRA) excluded. The company’s AMPC totaled 188.9 billion won (US$137 million).
In October 2023, LGES tempered revenue expectations for 2024, warning investors that high interest rates would affect electric vehicle sales. Slowing EV sales are reportedly affecting many automakers including legacy OEMs like Ford or Hyundai and EV manufacturers like Tesla.
At the TSLA Q1 2024 earnings call, Elon Musk commented that battery orders from EV automakers have declined.
“What seems to be happening is that the nets are missing something, the orders for batteries from other automakers have declined dramatically. So, we’re seeing much more competitive prices for sales from our suppliers, dramatically more competitive than in the past. It is clear that a lot of our suppliers have excess capacity,” he said.
Legacy automakers have started turning to plug-in hybrid production while EV sales are down. For instance, Hyundai recently announced that it will invest more in its upcoming Metaplant in Georgia to produce hybrids. Hyundai’s Georgia Metaplant was initially supposed to be solely dedicated to electric vehicle production.
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