Tesla supplier LG Energy Solution (LGES) warned of slow revenue growth in 2024. The South Korean battery supplier and Tesla CEO Elon Musk appear to share similar concerns about high interest rates affecting electric vehicle car sales.
LGES announced its Q3 2023 earnings recently. The Korean company warned of slowing revenue growth in 2024 during the announcement. It explained that global economic uncertainties might affect electric vehicle car sales.
According to local Asian news outlets, LGES joins the growing list of automakers and suppliers who have shown concerns about EV demand during rising interest rates. Companies fear high interest rates may increase financing costs and hinder growth in major economies like China and Europe, impacting car buyers in the long run.
“LGES shares were down even before the earnings announcement mostly because of GM’s earnings overnight, but we saw further drops during LGES’ earning conference call because the company said it expects revenue growth in 2024 would not be as big as what they saw in 2023, which had an impact on investors who already were concerned about demand,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
Tesla CEO Elon Musk shared similar concerns about interest rates during the company’s last earnings call.
“I am worried about the high interest rate environment that we’re in. I just can’t emphasize this enough: that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally,” commented Musk.
“If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car. They simply can’t afford it,” he said.
LGES posted a revenue of KRW 8.22 trillion, down 6.3% quarter-on-quarter and an increase of 7.5% year-over-year. It reported an operating profit of KRW 7.31.2 billion, up 58.7% quarter-on-quarter and 40.1% yoy.